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Feds target brokers who sought COVID relief funds: 3 things to know

On Behalf of | Nov 5, 2021 | FINRA

The pandemic and resulting stay-at-home orders were crippling for businesses throughout the nation. The federal government provided a number of different financial programs in an effort to help entrepreneurs stay afloat during these difficult times. Each program had its own rules and regulations to qualify for relief, and these guidelines were not always very clear. Regardless of unclear guidelines the feds are targeting those who they feel wrongly sought relief through these programs.

One specific sector that the feds have focused on: brokers. Reports abound of broker after broker facing allegations from the Financial Industry Regulatory Authority (FINRA) of improper requests for relief. FINRA’s allegations have led many brokers to agree to sanctions that include financial penalties and even the inability to continue within the industry.

Which brokers are being targeted by FINRA?

FINRA seems to target those who claimed small business status. Three things that brokers should know about this growing trend:

  • The type of relief. The feds are currently targeting those who received financial relief through the COVID-19 Economic Industry Disaster Loans program. FINRA is sanctioning those who do not meet the program’s definition of a small business.
  • The repercussions are serious. As noted above, penalties can include steep fees, as well as the inability to register as a broker — making it essentially impossible to continue operating within the industry.
  • Brokers can fight back. Depending on the details of the allegations, it is possible to build a defense to the claims.

It is important to note two additional realities. First, brokers or firms facing these allegations are not alone. FINRA is going after many within the industry for similar allegations of wrongdoing. Second, you do not have to go through the process without representation. Legal counsel can review the situation and provide guidance to better ensure your rights are protected.