A broker who receives a FINRA OTR notice, or a subpoena from the SEC must be aware that his prior customer and disciplinary history may significantly impact how the investigation is conducted, what charges will be brought and what penalties may apply. For this reason, it is imperative that anyone called to give testimony or documents to financial regulators seek the advice and counsel of an experienced lawyer as soon as possible after receiving the OTR letter or subpoena
The securities regulatory system is structured so as to increase punishment on repeat offenders. FINRA believes that disciplinary sanctions should be more severe for recidivists and has structured the disciplinary process so as to impose progressively escalating sanctions on recidivists up to and including a permanent bar and expelling firms.
FINRA has clearly stated that sanctions imposed on recidivists should be more severe because a recidivist, by definition, already has demonstrated a failure to comply with FINRA’s rules or the securities laws. The imposition of more severe sanctions emphasizes the need for corrective action after a violation has occurred, discourages future misconduct by the same respondent, and deters others from engaging in similar misconduct. Adjudicators should always consider a respondent’s relevant disciplinary history in determining sanctions and should ordinarily impose progressively escalating sanctions on recidivists. FINRA also encourages more severe sanctions when a respondent’s disciplinary history includes significant past misconduct that: (a) is similar to that at issue; or (b) evidences a reckless disregard for regulatory requirements, investor protection, or market integrity.
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