On May 2, 2019, FINRA released Regulatory Notice 19-17 and proposed FINRA Rule 4111 (Restricted Firm Obligations), which would authorize FINRA to designate “Restricted Firms” based on the number of event disclosures made by the firm and its registered persons. Restricted Firms would be subject to limitations on their operations and could be required to maintain restricted deposits that could be withdrawn only with FINRA’s consent. The deposit requirement would be intended to preserve funds to pay amounts awarded in future arbitrations and to pay penalties resulting from future FINRA enforcement actions and to incentivize Restricted Firms to change their behavior.
FINRA also proposed new Rule 9559, which would provide a check and balance to Rule 4111 by establishing a proceeding that would allow a Restricted Firm to challenge the imposition of that status under Rule 4111 and receive an expedited review.
The comment period for the proposals expires on July 1, 2019.
Regulatory Notice 19-17 is available at: https://www.finra.org/industry/notices/19-17