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Finra Sanctions Inconsistent with Sanction Guidelines Remanded by Commission

Kent M. Houston, Exchange Act Rel 34-66014, December 20, 2011

Finra barred Houston for his purported failure to "respond in any manner" to a Finra investigation.

Although Houston failed to appear for testimony before the investigators the record showed that he had apparently responded appropriately to Finra requests to produce documents. The Commission found that Finra had not sufficiently articulated why a bar was appropriate since Finra sanction guidelines establish a bar as the presumptive sanction only when there has been a total failure to cooperate. The opinion noted that while Finra may deviate from its sanction guidelines it must fully articulate why it is doing so.

While Finra found that Houston had also failed to notify his broker-dealer employer of outside employment, the sanctions were based solely on his failure to cooperate with the investigation.

The Commission remanded the matter to Finra due to the fact that it appeared he had in fact not been totally uncooperative during the investigation and because it found Finra's explanation for the bar was insufficient. It also noted that Finra might wish to reconsider its determination not to include Houston's failure to notify his employer of outside employment on reconsideration of the matter.