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V. Impeding Regulatory Investigations [Version up to Mar. 22, 2011]

Confidentiality Agreements—Settling With Customer in Exchange for Customer Agreement Not to Cooperate With Regulatory Authorities

FINRA Rule 2010

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Nature of restriction contained in confidentiality clause.
2. Whether the respondent voluntarily released the customer from terms of confidentiality agreement without regulatory intervention.
3. Whether the respondent released the customer from terms of confidentiality agreement (as applied to cooperation with regulatory authorities) after regulator advised the respondent to do so.
Fine of $2,500 to $50,000. Consider suspending the individual respondent in any or all capacities or suspending the firm (and/or responsible individual) with respect to any or all activities or functions for a period of one month to two years.

In egregious cases, expel the firm (and/or bar responsible individual) or bar the individual respondent.

Failure to Respond, Failure to Respond Truthfully or in a Timely Manner, or Providing a Partial but Incomplete Response to Requests Made Pursuant to FINRA Rule 8210

FINRA Rules 2010 and 8210

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section

Failure to Respond or to Respond Truthfully
1. Importance of the information requested as viewed from FINRA's perspective.

Providing a Partial but Incomplete Response

1. Importance of the information requested that was not provided as viewed from FINRA's perspective, and whether the information provided was relevant and responsive to the request.
2. Number of requests made, the time the respondent took to respond, and the degree of regulatory pressure required to obtain a response.
3. Whether the respondent thoroughly explains valid reason(s) for the deficiencies in the response.

Failure to Respond in a Timely Manner

1. Importance of the information requested as viewed from FINRA's perspective.
2. Number of requests made and the degree of regulatory pressure required to obtain a response.
3. Length of time to respond.
Failure to Respond or to Respond Truthfully

Fine of $25,000 to $50,000.

Providing a Partial but Incomplete Response

Fine of $10,000 to $50,000.

Failure to Respond in a Timely Manner

Fine of $2,500 to $25,000.
Individual

If the individual did not respond in any manner, a bar should be standard.1

Where the individual provided a partial but incomplete response, a bar is standard unless the person can demonstrate that the information provided substantially complied with all aspects of the request.

Where mitigation exists, or the person did not respond in a timely manner, consider suspending the individual in any or all capacities for up to two years.2

Firm

In an egregious case, expel the firm. If mitigation exists, consider suspending the firm with respect to any or all activities or functions for up to two years.

In cases involving failure to respond in a timely manner, consider suspending the responsible individual(s) in any or all capacities and/or suspending the firm with respect to any or all activities or functions for a period of up to 30 business days.

1 When a respondent does not respond until after FINRA files a complaint, Adjudicators should apply the presumption that the failure constitutes a complete failure to respond.

2 The lack of harm to customers or benefit to a violator does not mitigate a Rule 8210 violation.


Settling Customer Complaints Away From the Firm

FINRA Rule 2010

Principal Considerations in Determining Sanctions Monetary Sanction Suspension, Bar or Other Sanctions
See Principal Considerations in Introductory Section
1. Whether the respondent provided the employer with verbal notice of settlement and the employer acquiesced, or whether the respondent deceived his employer.
2. Whether the actions delayed or obviated the filing of required Forms U-4 or U-5 or NASD Rule 3070 filings.
Fine of $2,500 to $50,000. Consider suspending the respondent in any or all capacities for up to two years. In egregious cases, consider barring respondent.

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