The Financial Industry Regulatory Authority, Inc. (FINRA) posts the disciplinary actions it has taken to its online database. It also publishes a monthly summary of these actions, which is a worthwhile read for those in the industry – if only to gain insight into FINRA’s regulatory priorities. Below, I offer a thought on FINRA’s November 2025 edition.
FINRA censured and fined a member firm $125,000 for failing to return investor funds after altering the offering’s contingency terms. The firm also improperly deposited investor funds into an issuer-controlled account rather than into an unaffiliated bank escrow account prior to meeting the contingency. This violated SEC Rules 10b-9 and 15c2-4.
Rule 10b-9 prohibits representing an offering as contingent unless investor funds are returned if the contingency is unmet. Changing the contingency terms constitutes a new offering. Rule 15c2-4 requires investor funds to remain in a separate bank account until the contingency is satisfied. These are not mere technicalities; these are anti-fraud rules designed to protect investors.
And these rules are not nuanced – one either complies with requirements or does not. Regular training on these standards can be helpful to keep a broker-dealer on the right side of the line. So can a compliance checklist that requires associates to document the offering’s contingencies, flag any changes to those terms for compliance review, and confirm that investor funds are to go (and actually do go) to an unaffiliated bank escrow account.
Because broker-dealers, registered investment advisers and their representatives want to spend their time serving their clients, not their regulators.
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