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What is FINRA AWC?

When you look up a broker’s history on BrokerCheck, you might be surprised—and a little confused—to see that a broker has “entered into an AWC” with FINRA, the Financial Industry Regulatory Authority. What exactly is an AWC and what does it mean for investors?

Before we get into what an AWC is, it’s important to understand the role of FINRA Enforcement. According to FINRA, one of their top priorities is “to advance investor confidence in the securities markets through vigorous, fair and effective enforcement of FINRA and MSRB [Municipal Securities Rulemaking Board] rules, and federal securities laws and rules. FINRA’s Enforcement Department is tasked with investigating potential securities violations and, when warranted, bringing formal disciplinary actions against firms and their associated persons.”  FINRA can take disciplinary action two ways: settlement or a hearing (in front of the Hearing Officer and two industry panelists). Both brokers and brokerage firms can enter into an AWC. If a broker or brokerage firm decides to settle, they will sign an AWC, which stands for “Acceptance, Waiver, and Consent.”

If a broker or brokerage firm settles a case with FINRA by signing a Letter of Acceptance, Waiver, and Consent, it means that the registered representative or broker-dealer:

  • accepts the allegations without admitting or denying them
  • waives their right to have a complaint issued against them; to answer allegations in writing; to have a hearing before the Office of the Hearing Officers (OHO); and to appeal the decision to the NAC, SEC, or Court of Appeals;
  • consents to sanctions (like a fine or suspension)

An AWC begins as follows:

Pursuant to FINRA Rule 9216 of FINRA’s Code of Procedure, I submit this Letter of Acceptance, Waiver and Consent (“AWC”) for the purpose of proposing a settlement of the alleged rule violations described below. This AWC is submitted on the condition that, if accepted, FINRA will not bring any future actions against me alleging violations based on the same factual findings described herein.

The document has various sections, including:

  • Background
  • Relevant Disciplinary History
  • Overview
  • Facts and Violative Conduct
  • Waiver of Procedural Rights
  • Other Matters

Three parties sign the document: the respondent, counsel for the respondent, and counsel for FINRA Enforcement.

Although some brokers may later claim that they only entered into an AWC in order to avoid expensive litigation or to save time, FINRA can still publicize the AWC pursuant to FINRA Rule 8313. An AWC still becomes part of their permanent disciplinary record (available internally on the Central Registration Depository (CRD) and to the public via BrokerCheck). FINRA also issues monthly and quarterly reports with information about brokers who have been subject to disciplinary actions, including those who have entered into AWCs. For our summary of FINRA’s July 2019 round-up of disciplinary actions, see “FINRA Disciplinary Actions: July 2019.” Once they’ve signed an AWC, a broker or broker-dealer cannot deny the findings contained in the letter.

FINRA seeks to protect investors from harm, and one of the ways they do that is through their Enforcement Division and its levying of Letters of Acceptance, Waiver, and Consent. Investors, however, should take steps to protect themselves before their broker or brokerage firm is subject to a serious regulatory action and enters into an AWC. Still, if it comes to that, FINRA will make sure that brokers and broker-dealers are held accountable for their actions within the securities industry, actions that can have real consequences for investors and consumers.

If you have questions about FINRA AWCs, don’t hesitate to contact Fitapelli Kurta at (877) 238-4175 or info@fkesq.com.