A special enforcement team will lead a crackdown on securities brokers whose records show too many customer complaints and rules violations, Wall Street’s self-regulator said Thursday.
Creation of the new unit was disclosed in the Financial Industry Regulatory Authority’s annual announcement of its priorities for 2014 in overseeing the activities of 4,180 firms and 636,000 brokers nationwide. The team of up to six examiners would focus on individual “high-risk” brokers as well as the hiring and management practices of firms that give them jobs.
Also on FINRA’s priority list were mutual funds that invest in so-called frontier markets. This fund category was among the top performers in 2013, and such high-flying investments “are the ones that worry us the most,” FINRA chairman and chief executive Richard Ketchum said in an interview. Retail investors often follow trends that are better suited for institutional investors, and brokers fail to assess the risk appropriately.
Last year, FINRA quietly began a crackdown on brokers with highly checkered records. It now says it barred 22 brokers in the effort, or about half of those it had identified as high-risk through regulatory disclosure forms and from investors’ tips, complaints and formal arbitration claims.
