FINRA Fines: Dollar Amounts Surge, Disciplinary Actions Down



The Financial Industry Regulatory Authority (FINRA) levied fines worth $42.4 million against broker/dealers and other intermediaries in the first six months of 2014. This is an increase of 84 percent compared to the first six months of 2013, according to the international law firm Sunderland, Asbill & Brennan.

Sunderland, citing FINRA’s June disciplinary report, said that at this pace FINRA will have levied fines worth $85 million by the end of the year.

FINRA levied fines worth $23 million in the first half of last year and $57 million for all 2013, Sunderland also said.

“That figure ($85 million) would represent the highest amount of fines reported by FINRA since the financial crisis and the most fines reported by FINRA since 2006,” Sunderland said in a press release.

In 2006, FINRA slapped $111 million worth of fines on broker/dealers and other FINRA-regulated companies.

Big fines, those of $1 million or more, were the reason for the increase, Sunderland also said.

There were five fines of more than $1 million in the first half, and those five fines came to $20.4 million, with one monster fine of $8 million involving compliance failures in connection with money-laundering and penny stock transactions, skewing the numbers this year, Sunderland said.

In the first six months last year, there were only two “supersized” fines, which came to $2.3 million.

FINRA reported 558 disciplinary actions during the first six months, a 7 percent drop compared to the first six months of last year, Sunderland also said.

The categories of fines appear to be changing.

Sunderland said the fact that the fines revolve around books and records, as well as trade reporting violations, is a sign that regulators are finding inconsistences with technical issues and substandard compliance.

Fines levied by FINRA in connection with advertising and matters of investment suitability have dropped compared with the years immediately following the financial crisis.

“FINRA appears to be repositioning itself as its actions shift from cases relating to the financial crisis to more technical issues,” Sunderland said.

In the first six months, the category with the highest fine total — $13.7 million — was books and records, followed by trade reporting ($6.7 million), electronic communications ($6.2 million), short selling ($2.2 million), and municipal securities ($1.6 million), according to Sunderland’s tally.

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In the first six months, the category with the highest number of cases was trade reporting (92 cases), followed by books and records (61 cases), electronic communications (30 cases), short selling (17 cases), and municipal securities (13 cases), Sunderland said.

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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