Quick Answer
Penalties attach only at the end of a disciplinary case, after a hearing or an accepted settlement. They range from a censure or reprimand, through a cease and desist order and a fine, up to suspension, expulsion of a Member, or a bar of an Associate. The maximum fine is $500,000 per violation.
Sanctions are the bottom of the funnel. They attach only when a case actually concludes, and they run from a mild censure all the way up to permanent removal from the industry.
Penalties Available After a Proceeding
Penalties are not handed out on suspicion. They arrive only after the case is resolved.
- Penalties are imposed only at the conclusion of a disciplinary proceeding, after a hearing or an accepted settlement, by the Business Conduct Committee, the Hearing Panel, or the Appeals Committee. One or more of the following may be ordered.
| Penalty | What it does | Applies to |
|---|---|---|
| Expulsion | Permanent removal from membership (the most severe outcome; requires a two-thirds vote of the deciding panel) | A Member (firm) |
| Bar | Permanent prohibition from association with any Member | An Associate (individual) |
| Suspension | Removal from membership or association for a specified period | Member or Associate |
| Cease and desist order | A directive to stop the prohibited conduct going forward | Member or Associate |
| Fine | A monetary penalty, not to exceed $500,000 per violation | Member or Associate |
| Censure or reprimand | A formal statement of disapproval on the record | Member or Associate |
- Expulsion and bar are the "out of the industry" outcomes: expulsion removes a firm from membership, and a bar removes an individual from association. Both are reserved for the worst conduct, and expulsion takes a two-thirds vote of the deciding panel.
Exam Tip: Gotchas
- Expulsion applies to a Member (a firm); a bar applies to an Associate (an individual). The exam swaps these. A firm is expelled, a person is barred, and both are permanent.
- Penalties attach only at the conclusion of a case. There is no penalty on the strength of the Complaint alone. The sanction follows a hearing or an accepted settlement.
The Maximum Fine Is Per Violation
The dollar figure is the one number in this unit, and the tested nuance lives in two words: "per violation."
- The maximum monetary fine is $500,000 per violation. The cap applies to each violation, not to the case as a whole, so total exposure scales with the number of violations found.
- A matter with several violations can therefore carry several of these maximums stacked, rather than a single case-wide ceiling. (Some older study materials cite $250,000 and are out of date; the current cap is $500,000 per violation.)
Exam Tip: Gotchas
- The key words are "per violation." The $500,000 cap is applied to each violation, not to the whole case, so a firm with multiple violations can face more than $500,000 in total. An answer that treats it as a single case-wide limit is wrong.
The Penalty Ladder
Lining the outcomes up from least to most severe makes the warning-letter trap obvious.
- Warning letter (not a penalty; the matter is closed)
- Censure or reprimand (formal disapproval, no operational restriction)
- Cease and desist order (stop the specific conduct)
- Fine (up to $500,000 per violation)
- Suspension (out for a set period)
- Expulsion of a Member, or bar of an Associate (out permanently)
- Only rungs 2 through 6 are disciplinary penalties. Rung 1, the warning letter, sits below the ladder because it is issued when the association declines to prosecute.
Exam Tip: Gotchas
- The warning letter is NOT on the penalty ladder. The exam loves to slip it onto a list of sanctions. It is a caution issued when a matter is closed, so it sits below the ladder, not on it.
Remember that this whole ladder is the association acting as a self-regulator against its own Members. That is different from arbitration, which resolves a private dispute between parties (often for money damages), as the arbitration procedures unit covers. Discipline is the association versus a Member; arbitration is one party versus another.