FINRA recently sanctioned Independent Financial Group LLC (IFG) with a $100,000 fine and a censure after finding the firm allowed a suspended registered representative to continue conducting activity from April through November 2022. IFG agreed to the settlement without admitting or denying the findings and waived any defense based on inability to pay.
Below is a longer, more detailed analysis of what happened, why it matters, the regulatory and legal issues raised, what investors should do now, and how firms should respond to prevent similar lapses.
Quick summary of the facts
Table of Contents
- FINRA concluded IFG allowed a registered representative who was under suspension (and thus barred from associating with any FINRA member) to continue routing or effecting securities orders through IFG’s systems and its clearing firm’s trading desk and electronic systems.
- FINRA cited violations of Article III, Section 3(b) of its Bylaws, Rule 8311, and Rule 2010.
- IFG consented to a censure and a $100,000 fine, without admitting or denying wrongdoing, and waived the right to claim inability to pay.
- IFG operates an independent-contractor model with roughly 380 branch offices and approximately 650 registered representatives nationwide, and reported about $33 billion in assets under advisement.
Why this enforcement action matters
Protecting market integrity and investors
FINRA’s rules are designed to prevent individuals who are under regulatory discipline from continuing to trade or service clients while suspended or disqualified. Allowing a suspended person to continue to participate in firm systems threatens investor protection and undermines market integrity. Even where no explicit fraud is alleged against the suspended individual in the settlement, permitting access during a suspension raises the risk of unauthorized trading, mishandled client funds, or other misconduct.
Operational risk in decentralized business models
IFG’s independent-contractor model — where advisers operate semi-autonomously on the firm’s platform — creates operational and supervisory complexity. Decentralized networks can make it harder to enforce access controls, promptly remove permissions, and monitor trade flow, increasing the chance that a suspended or disqualified person may retain inadvertent access to trading or account-management tools.
The rules at issue — plain English
Article III, Section 3(b) of FINRA’s Bylaws
This provision implements the requirement that a firm may not permit an individual subject to a “statutory disqualification” to be associated with the firm. A statutory disqualification can flow from prior disciplinary orders, certain criminal convictions, or other disqualifying events recognized under securities law. In practice, it means firms must cut off all association with such individuals unless FINRA grants relief.
FINRA Rule 8311
Rule 8311 specifically addresses how member firms must treat persons who are subject to sanctions or statutory disqualification. It imposes clear prohibitions on permitting such persons to participate in firm activities that could affect customers or the market. This is a bright-line rule intended to prevent circumvention of regulatory discipline.
FINRA Rule 2010
Rule 2010 is a broad catch-all requiring firms and associated persons to observe high standards of commercial honor and just and equitable principles of trade. Violations of other FINRA rules commonly trigger Rule 2010 charges as well, reflecting the obligation to maintain ethical, law-abiding conduct.
Potential investor harms from this type of failure
- Unauthorized trades or activity processed under the firm’s clearing relationships.
- Transactions executed without the proper supervision or oversight that would normally detect unsuitable recommendations or excessive trading.
- Conflicts of interest or undisclosed conduct by a suspended person that could harm clients.
- Difficulty tracing or recovering losses if improper activity occurred while the suspended individual had access.
What investors should do now
If you were a client of IFG or of the representative during the April–November 2022 window, consider taking these steps:
- Obtain records
- Request complete account statements and trade confirmations for the relevant period.
- Ask the firm for its internal supervision and communications relating to the representative and any trades they placed or routed.
- Ask targeted questions
- When and how did IFG terminate or restrict the representative’s access once the suspension was issued?
- Which accounts, if any, were affected, and what remediation steps did the firm take?
- Preserve evidence
- Save emails, account notices, and trade confirmations.
- Note dates and names of any conversations with the firm.
- Consult counsel experienced in securities and FINRA-related matters
- An attorney can analyze account activity, advise on potential claims (e.g., breach of fiduciary duty, negligent supervision, unsuitability, or claims under state securities laws), and guide any required communications with regulators.
- Consider filing a complaint
- If you suspect harm, you may file a complaint with FINRA and/or the SEC, and you can also discuss private recovery options with counsel.
Sample request letter to the firm (copy and send by email or certified mail):
Legal remedies that may be available
Potential legal claims will depend on the facts, but may include:
- Breach of fiduciary duty or negligence by the broker or firm if trades were unsuitable or unauthorized.
- Negligent supervision claims where the firm failed to maintain reasonable supervisory procedures enabling a suspended person to act.
- Claims under state securities laws or the federal securities statutes for misrepresentations or market manipulation (fact-specific).
- FINRA arbitration or court actions to recover losses — many brokerage disputes are resolved through FINRA arbitration.
Because these issues are fact-intensive, a consultation with counsel will help determine viable claims and deadlines (including statute of limitations and required pre-suit steps).
What firms should (and must) do differently
Firms should take reinforced and practical steps to prevent similar enforcement actions:
- Immediate access termination: Adopt automated, centralized processes to suspend system credentials and trading permissions the instant a regulatory suspension or statutory disqualification is identified.
- Routine audits: Conduct periodic audits that reconcile personnel status with system access logs, clearing firm connectivity, and order routing permissions.
- Strong escalation protocols: Establish clear incident-response playbooks so compliance, IT, and operations coordinate immediately when a representative’s regulatory status changes.
- Robust training: Ensure staff understand statutory disqualification consequences and the importance of immediate, documented action.
- Clearing firm coordination: Maintain written procedures with clearing firms to ensure that clearing desks and routing processes will block orders from disqualified individuals.
Enforcement trends and precedent
FINRA has been active in enforcing supervisory failures and access-control weaknesses, particularly where decentralized or independent-contractor models introduce supervisory gaps. The IFG action is consistent with prior enforcement showing regulators will penalize firms that fail to cut off access to suspended people even when the operational misstep may be limited in scope.
Conclusion — stay vigilant
The FINRA sanction against IFG is a stark reminder that regulatory discipline must be supported by practical, operational controls — especially in business models where advisers operate independently. For investors, the takeaway is to carefully review account activity during any periods where your adviser’s status changed and to assert your rights promptly if you detect suspicious or harmful conduct.
If you believe you were affected by trades or account activity during the suspension period, collect your records and consider contacting counsel experienced in broker‑dealer misconduct and investor recovery. For a confidential consultation about losses or to learn whether you have a claim, contact the attorneys at InvestmentFraudLawyers.com. We can review your account history and advise on next steps.
