Common FINRA violations and how to avoid them

The Financial Industry Regulatory Authority (FINRA) regulates the securities industry and ensures that member brokerages and financial professionals operate fairly and honestly. To protect your reputation and your client’s interests, you must comply with FINRA regulations.

Here are seven typical FINRA violations and how to avoid them:

• Failing to disclose important information: Always be transparent with your clients. Tell them about all risks, fees and conflicts of interest for any financial product or service you offer.
• Making unsuitable recommendations: Know your client’s financial goals, risk tolerance and investment timeline. Use this information to suggest appropriate investments.
• Misrepresenting information: Provide accurate and truthful details about investment products or services. Double-check all data, and don’t exaggerate benefits.
• Trading without permission: Get explicit consent from your client before trading. Keep detailed records of all communications and authorizations.
• Failing to supervise: As a manager, you are responsible for your team’s actions. Create robust oversight procedures, review team activities regularly and provide ongoing training.
• Keeping inaccurate records: Use reliable systems to maintain precise records of all transactions and communications. Audit your records often to ensure accuracy.
• Having conflicts of interest: Tell clients about potential conflicts and take steps to reduce them. Always put your clients’ interests first.

Understanding these violations and avoiding them can build a trustworthy practice. However, if you are already facing a FINRA violation, it is essential to understand the allegations against you and the potential consequences.

Don’t face FINRA violations alone. We help brokerage firms and finance professionals facing FINRA charges mount a credible defense. Contact us today for a consultation.