According to yesterday’s InvestmentNews article entitled “FINRA’s new exam unit looking to identify rogue registered reps,” FINRA will identify up to 200 rogue registered representatives who pose the greatest risk to investors, according to a senior official with FINRA. The authority plans to call broker-dealer compliance executives when it sees a high-risk broker to determine if the firm is aware of that fact, and to find out what kind of heightened supervision will be necessary. FINRA recently implemented a dedicated examination unit to identify and examine brokers who may pose a high risk to investors. This unit will then review brokers’ compliance with rules regarding suitability, know-your-customer, outside business activities, commissions and fees and private securities transactions. A University of Chicago and a University of Minnesota study last year found that 7% of financial advisers had been disciplined for misconduct, and such brokers make up about 20% of some firms. FINRA will then go to the firms where the individuals were hired to focus on whether those changes and heightened supervision are being implemented and kept up.
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