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FINRA lowers the caps on some penalties and establishes fine levels for AML violations.

In new advice, the Financial Industry Regulatory Authority (FINRA) enhanced fines for members who violate securities laws.

The present criteria for sanctions are divided into those for people and those for businesses, and the fine levels for the latter are divided into two categories for small businesses and another for mid-sized to big businesses, starting on September 29.


The new penalties for anti-money laundering (AML) offenses are established by the guidelines, which also remove the top limit on some fines for transgressions including failing to appropriately monitor and report suspicious transactions. The regulations specify when a company or individual should be suspended or expelled for wrongdoing as well as the ranges of fines that can be imposed on them.

The guidelines outline a number of general principles FINRA will use to determine sanctions, such as deterrence, harsher penalties for repeat offenders, sanctions designed to address the misconduct at issue, grouping violations together depending on the circumstances, when restitution should be paid to victims, disgorgement of ill-gotten gains, and consideration of factors like whether other regulators have penalized a firm or individual for the same misconduct. Companies and people who have been sanctioned can request to have their sanctions lifted or reduced due to financial hardship. To continue to operate or work in the securities sector, all respondents in a penalty case must requalify through examination.


A FINRA regulatory notification states that the standards specify a $5,000 minimum punishment for every sanction against a business that justifies one. Individuals are subject to a minimum fine of $2,000. The National Adjudicatory Council created the new sanctions.


The new AML sanctions guidelines for small businesses—those with 150 or fewer financial professionals—include $10,000 to $310,000 for failing to reasonably monitor and report suspicious transactions, $10,000 to $100,000 for an inadequate AML program and $5,000 to $50,000 for failing to provide for independent testing, the designation of responsible individuals, or training.


The AML sanctions guidelines for mid-sized and large businesses include $50,000 to no upper limit for failing to reasonably monitor and report suspicious transactions, $20,000 to $310,000 for a subpar AML program and $20,000 to $200,000 for failing to provide for independent testing, the designation of responsible individuals, or training.


AML violations may warrant a suspension of 10 days to two months for businesses of all sizes. According to FINRA, aggravating circumstances may warrant a suspension of up to two years.


The following offenses might result in a punishment of up to $310,000 for small businesses: lying to investigators; fraud, misrepresentation, or omission of fact; best execution rule violations; systematic supervisory failures; churning, excessive trading, or switching. The amount of associated fines levied on medium-sized and big businesses would have no maximum limit.


Excessive markups/markdowns, excessive commissions, and violations relating to research report relationships, information barriers, potential conflicts of interest, disclosure failures, and limitations on personal trading would all be subject to similar sanctions of up to $310,000 for small firms and no upper limit for larger firms.


Individual fines can be up to $100,000, and many infractions already carry established punishments like suspension or expulsion.

By fLEXI tEAM

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