The CEO of FINRA recently announced that FINRA plans to provide firms with additional resources to deal with recidivist brokers. So what does this mean?
For years, FINRA’s exam priorities have focused on, among other things, brokers who are repeat violators of FINRA rules. FINRA has made this a priority as a way to weed out brokers who do not deserve to be in the industry because they are likely causing more harm than good.
FINRA is effectively asking the firms to do their part in cleansing the industry of bad brokers. What can a firm do in this regard?
First, firms must take more care in the hiring process. Your due diligence cannot begin and end by pulling the registered representative’s CRD. You should run a Google (or similar) style search on the broker. There are also services you can use to find out if there are judgments, liens or lawsuits against the broker. This way, you can find red flags that may not appear on CRD.
Second, once you hire the broker, you have to make sure he/she is coming under a robust supervisory and compliance overview. Be proactive if you sense there is a problem. By doing do, even if there is a problem, you may be able to cut it off before it gets worse.
There is no easy solution. From FINRA’s perspective, however, you are either part of the solution or part of the problem. The choice is yours.