Article Originally Published: Investment News
Is Finra up to its job? Is it, as the Heritage Foundation Project 25 says, “ineffective, costly”?
A Finra December disciplinary report offers a peek into Finra’s enforcement of Reg BI.
The eight actions reported include one case that revolves around Investment Network Inc of Canton, Ohio and Gary Lee Arnold of Akron, Ohio.
The firm and Arnold, without admitting or denying the findings, agreed to sanctions for violations of Reg BI that included, “Failing to disclose a conflict of interest by misrepresenting the amount of compensation the firm received from sales of private placement offerings”, and “the firm willfully violated Reg BI” by failing to comply with the Care Obligation by lacking a reasonable basis to recommend the offerings”. These violations were deemed “willful”.
The action? The firm was suspended from conducting any private placements for 60 days, censured, fined $210,000. And ordered to pay disgorgement of commissions of $63,769. Arnold was fined $10,000, suspended from any association with a Finra member for three months, and “required to requalify by examination” before joining a Finra member in any principal capacity.
Are these appropriate sanctions? Do these sanctions deter violators?
Here’s another peek into Finra enforcement. Last month Finra released its 2025 oversight report, which revealed “findings from Finra’s regulatory operations programs”. In 1500 words, the report describes member examination results on Reg BI and Form CRS.
The findings are remarkable. After being subject to Reg BI/CRS for four and a half years, firms fail to meet the most basic Reg BI/Form CRS requirements. “Failure” is the theme. The words “fail or “failing” are found 29 times.
