The new suitability and Know-Your-Customer rules will present FINRA with the opportunity to bring a variety of enforcement actions against both firms and registered representatives. The types of cases will likely be similar to enforcement actions that FINRA has brought under the existing rules.
Such cases have been a significant part of FINRA’s enforcement docket. For example, FINRA reported 53 cases involving alleged suitability violations in 2010. These cases resulted in $3.75 million in fines, the fourth-largest amount for any category of case in 2010. Although suitability cases again resulted in the fourth-largest amount of fines in 2011, the total sanctions in those cases jumped to $7.7 million, an increase of 105% from 2010. Similarly, the number of suitability cases FINRA reported in 2011 doubled to 106. This increase in annual sanctions was partially driven by two fines in excess of $2 million, while the largest fine in a 2010 suitability case was $900,000.
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