by Sarah Curry
Director of Fiscal Policy Studies
According to an article by FinancialPlanning, FINRA fines doubled last year. I’m not sure about you, but I’m concerned when I see a highly regulated industry, such as the financial planning and investment industry receiving a lot of fines. What are they doing wrong? Who is paying for these fines? Are the regulations over burdensome, and that is what is causing the increase in fines? These are all questions and more that I have when I see headlines about FINRA fines.
FINRA slammed registered reps and their firms with hefty fines in 2014, the stiffest they’ve seen since the financial crisis, according to an analysis by law firm Sutherland Asbill & Brennan.
In 2014, the regulator meted out roughly $135 million in fines, more than double the $60 million assessed in 2013 and more than four times the $28 million assessed in 2008. The fines were for violations ranging from inadequate supervision of research analysts and insufficient anti-money-laundering controls to trade reporting deficiencies and improper advertising.
In addition to paying fines, firms and registered reps were ordered to fork over a record $52 million in restitution, up five-fold from $10 million in 2013.
“FINRA’s large increase in fines cannot be ignored,” Brian Rubin, co-author of the study, said in a statement. “Even though FINRA has not brought cases of the same magnitude as some of the SEC’s enforcement actions, firms and individuals must still sit up take notice of the kind of year FINRA had and the messages sent through its enforcement actions.”
The fines were considerably larger than in previous years, with 25 in the amount of $1 million or more. Ten of the 25 “supersized” fines were at least $5 million. In total, the regulator reaped more than $100 million in one-million-dollar-plus fines.
The increase in fines was especially dramatic in cases involving seniors and retirees, soaring to $8 million from $213,000 in 2013. Restitution in these cases also jumped, from $1.7 million in 2013 to $26 million in 2014.
While fines were up, the number of disciplinary actions overall declined in 2014, falling 9% to 1,397 from 1,535 in 2013.
Fewer actions, however, didn’t bring down the number of reps either barred or suspended from the industry. In 2014, FINRA expelled 481 reps from the industry and suspended 705, up 12% and 5%, respectively, from 2013.