New FINRA rule imposes new obligations on broker/dealers – self-reporting misconduct
Starting July 1, 2011, broker/dealers will be facing new reporting requirements of wrongdoings under FINRA Rule 4530. The new rule will be expanding on a broker/dealers ongoing obligation to report external findings such as litigation and regulatory actions pursuant to NASD Rule 3070. Specifically, the new Rule will require under Section 4530(b) that broker/dealer firms are to report within 30 days after the firm has concluded that an associated person, or the firm itself, has violated any financial law, rule, regulation, or standard of conduct established by a regulatory body. This new requirement is a major overhaul to the disciplinary approach and procedures that are currently used to monitor broker/dealer firms. The Rule also places both an immediate and long-term administrative burden on borker/dealer firms in that they will need to design new systems to conform with the new documentation requirements. It will be interesting to see what, if any, effect this may have on the regulation of broker-dealers in the future. Erik M. Bashian, a New York trial attorney and partner of Bashian & Papantoniou, is a former legal enforcement intern with the NASD.