According to a review of Financial Industry Regulatory Authority actions in 2013, fines imposed by the self-regulatory organization dropped by 27% compared to the year before, even though the number of cases during both were almost identical. Sutherland Asbill & Brennan LLP, which completed the review, said that last year FINRA imposed $57 million of fines, compared to $77 million in 2012.
The fine total from 2013 was the lowest imposed since 2010, when the regulator fined member firms and associated individuals $45 million. Also, even though the fines went down, there was 1% less disciplinary actions brought by FINRA at 1,535 actions, compared to the 1,541 submitted made in 2012. Another decline occurred in the number of firms that FINRA expelled—24 in 2013 and 30 in 2012. That said, the SRO did suspend more individuals—670 last year, up from 549 the year before—and bar more persons from 294 in to 429 last year, which is a 46% increase.
Sutherland’s believes the fines went down because many of the cases generated by the financial crisis have been tackled. This means that even with so many cases, these aren’t necessarily resulting in fees that are as high.
The firm’s report also identified the top enforcement issues of 2013 for FINRA, including:
1) Electronic communications: Includes failure to review, supervise, and retain emails and other e-communications. This issue resulted in the most fines imposed at $15 million in over 60 cases.
2) Trade reporting: There were 198 trade reporting cases that generated $12.1 million in fines.
3) Short selling: 40 cases and $7.2 million in fines.
4) Books and records: 95 cases resulting in $7.1 million in fines.
5) Municipal securities: There was a 21% rise in the number of cases brought at 51, up from 42 cases in 2012.
Regarding enforcement trends, suitability was not one of the top enforcement issues with FINRA last year. Sutherland again notes that this may be because the SRO has completed most of its suitability cases stemming from the 2008 economic crisis.
Fines related to advertising also slowed, as did the number cases that rendered “supersized” fines. Another enforcement trend that slowed down was the area of complex products, including cases involving collateralized mortgage obligations, real estate investment trusts, and unit investment trusts.
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Finra fines, complaints drop as market improves, Investment News, February 26, 2014
Annual Sutherland Analysis of FINRA Sanctions Shows 27% Decrease in Fines; Number of Cases Nearly Identical, Marketwatch, February 24, 2014
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