From the August 2010 issue of Investment Advisor • Subscribe!

August 1, 2010

The FINRA Blotter

Sidebar to the Broker/Dealer Briefing "The FINRA Blotter"

The law firm of Sutherland Asbill & Brennan completed in early July its annual review of disciplinary actions brought by FINRA in 2009. By reviewing the SRO's notices and releases, Sutherland found that FINRA reported modest increases in fines and disciplinary actions in 2009, as compared to 2008, but was less active than in 2005, 2006, and 2007.

FINRA fined firms and individuals approximately $50 million in 2009, almost twice as much as in 2008 ($28 million). While that increase is noteworthy, FINRA's fines in 2009 were still significantly smaller than the fines obtained by FINRA and its predecessors (NASD and the New York Stock Exchange) in 2005, 2006, and 2007 ($184 million, $111 million, and $77 million, respectively). In addition, FINRA resolved more disciplinary actions in 2009 (1,090) than in 2008 (1,007), but fewer than were resolved in prior years (1,344 in 2005; 1,147 in 2006; and 1,107 in 2007).

Mutual funds, which generated the most fines in 2008, once again produced the highest aggregate amount fines (approximately $12 million), narrowly edging out Suitability. Mutual fund cases accounted for nearly one-fourth of FINRA's total fines in 2009.

Suitability cases finished a close second in total fines (approximately $11.9 million). Fines were imposed for excessive trading and unsuitable sales of various products, including collateralized mortgage obligations (CMOs), hedge funds, unit investment trusts, installment plan contracts, and variable products.

Variable products cases generated approximately $6.45 million in fines in 2009.

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