Stockbrokers are responsible for handling their clients’ investment portfolios, trades, and sales and for making suitable investment suggestions. However, there are many brokers who engage in misconduct for their own financial gain, which ultimately results in tremendous stock losses for the investor.
For this reason, the Financial Industry Regulatory Authority (FINRA) has enacted a supervision rule that should protect investors from being swindled by their brokers. Continue reading to learn more about the FINRA supervision rules and how these protections can influence you as an investor.
The supervision rule is outlined in FINRA Rule 3110. This rule requires brokerage firms to devise, implement, and maintain a system that allows them to supervise the activities of their stockbrokers.
These written supervisory procedures must include which person or persons are responsible for review of securities and banking, how frequently reviews will be conducted, how the results of the review will be documented, and the responsibilities of the individuals conducting the reviews.
As an added protection, brokerage firms are also required to include a way for clients to confirm specific types of transactions, including changes in the investor’s goals and the transmittal of investor funds.
Apart from Rule 3110, FINRA has other supervisory rules that need to be followed by brokerage firms. For example, Rule 3130 requires brokerage firms to notify FINRA of their chief compliance officers and requires that the chief executive officer sign off that the firm is compliant with the components outlined in Rule 3110.
Another supervisory rule includes Rule 3120, which requires financial institutions to have a way to both test and verify the supervisory procedures they have implemented. A report describing this control system will need to be submitted annually to senior management at the brokerage firm in question.
If you have been a victim of stockbroker misconduct and believe that the brokerage firm that employs your broker may have been in violation of FINRA’s supervision rules, get in touch with an experienced FINRA lawyer at Meissner Associates to file a complaint.
You can take advantage of your free consultation today by giving our office a call at 212-764-3100 or by filling out the online contact form we have provided at the bottom of this page.
