Jan 2 Wall Street brokerages that hire
stockbrokers who have a track record of misconduct should expect
to show examiners how they will curb future wrongdoing, the
industry's watchdog said on Thursday in an overview of issues it
will review in 2014.
The Financial Industry Regulatory Authority (FINRA) will
review the process that firms use to research problem brokers
before hiring them, FINRA said. The industry-funded watchdog
also wants to know whether the firms take extra measures to
supervise the brokers to prevent future misdeeds, such as sales
abuses involving client accounts.
FINRA, which routinely examines the industry's nearly 4,200
securities firms to gauge their compliance with securities
industry rules, published its annual list of "examination
priorities" on Thursday. The regulator also oversees the
industry's 636,200 brokers.
Only a "small number" of brokers have engage in a pattern of
misbehavior that could harm investors, FINRA said.
The regulator is also honing in on potential risks posed by
brokers who worked at firms that were expelled from the
securities industry, FINRA said. Many of the brokers are not
barred because of their firms' wrongdoing and find work at other
firms. They may, however, bring "unethical or illegal practices"
with them, FINRA said. The regulator is identifying and
monitoring the firms and individuals, it said.
FINRA's heightened scrutiny of problem brokers during its
upcoming examinations follows a program it launched in 2013 to
fast-track investigations and disciplinary cases involving risky
brokers who may pose the greatest threats to investors.