Mike Rufino, the head of the Financial Industry Regulatory Authority (FINRA) member regulation, recently outlined how the organization defines a high-risk broker during its annual conference in Washington.
Rufino said that while there is no strict definition, FINRA uses specific criteria to identify these financial representatives, including:
- Geographical location
- Exam attempts
- Employment and termination history
“Then we use that quantitative assessment that we qualitatively assess and look at the number of complaints a broker has, the nature of those complaints,” Rufino said.
FINRA also looks at the number of disclosures the broker has, and when they occurred. Rufino said that when a broker has a high number of recent disclosures, it could elevate the level of risk associated with them. FINRA will also look at whether or not they are currently appealing sanctions.
“If FINRA has barred the individual and you have an appeal [to FINRA’s National Adjudicatory Council] we deem those individuals to be of the highest risk, and they will automatically be deemed a high-risk broker by FINRA,” he said. “We will monitor and examine those individuals very closely while they wait for their appeal.”
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