FINRA Fires Up Fines, With Focus On Elder Abuse

By Arthur D. Postal
InsuranceNewsNet

WASHINGTON – Fines imposed by the Financial Industry Regulatory Authority on firms and individuals for alleged wrongdoing “increased significantly” in 2014 with a sharper focus on cases involving seniors and retirees, according to a new study.

At the same time, the review found that for the second year in a row, the number of firms expelled by FINRA declined, although the number of individuals suspended or barred rose.

“FINRA’s large increase in fines cannot be ignored,” said Brian Rubin, co-author of an annual study by lawyers at Sutherland, Asbill & Brennan.

“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 and take notice of the kind of year FINRA had and the messages sent through its enforcement cases,” Rubin said.

The study was conducted by reviewing FINRA’s monthly disciplinary notices and press releases, as well as cases reported in major news sources. The review found that that in 2014, FINRA’s fines increased significantly.

At the same time, despite this increase in fines, the number of cases filed by FINRA dropped in 2014, according to the study conducted by Rubin, a partner at Sutherland, along with Andrew W. McCormick, an associate.

The study found that protecting seniors and retirees has been a key focus for FINRA, but these cases typically did not result in significant fines, the study found.

“This changed dramatically in 2014,” the study found, with cases involving allegations about seniors and retirees resulted in $8 million in fines in 2014, an increase of 3,656 percent from the $213,000 in fines imposed in similar cases in 2013.

Similarly, the study found, restitution in these cases increased substantially from $1.7 million in 2013 to $26 million in 2014, an increase of 1,429 percent.

The Sutherland report said that the number of firms expelled by FINRA declined from 24 in 2013 to 18 in 2014, a decrease of 25 percent. This followed a 20 percent decrease in the number of firms expelled during the prior year.

However, the number of individuals suspended or barred rose in 2014, the review found. The number of individuals suspended increased from 670 in 2013 to 705 in 2014, an increase of 5 percent, and the number of individuals barred jumped from 429 in 2013 to 481 in 2014, an increase of 12 percent.

The review found that for the second year in a row that suitability cases were not a top enforcement issue for FINRA. Yhe study authors indicated that this “sudden drop” in suitability cases over the past two years is likely because FINRA has completed most, or possibly all, of its cases relating to the financial crisis.

The Sutherland review said suitability cases ranked second in 2008 and 2009, fourth in 2010 and 2011, and first in 2012.

“Although the fines in suitability cases increased slightly in 2014, from $5.1 million in 2013 to $5.6 million in 2014, this is a far cry from the $19.4 million in fines reported in 2012 suitability cases,” the Sutherland review found.

Likewise, the review found, the number of suitability cases increased slightly from 73 in 2013 to 75 in 2014, but “fell well short” of the 112 suitability cases reported in 2012.

InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].

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