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Regulation and Compliance > Federal Regulation > FINRA

FINRA’s 5 Biggest Fine Categories in First Half of 2015

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Fines imposed by the Financial Industry Regulatory Authority during the first half of 2015 totaled $37.5 million, and the agency appears on track to impose this year the second-highest amount of fines since the financial crisis. 

According to data released Monday by the law firm Sutherland Asbill & Brennan, FINRA imposed $135 million in fines last year, and if the regulator continues at its current pace will impose a projected fine total of $75 million.

Despite the drop-off in total fines, the top fine getters for FINRA during the first half of 2015, in terms of the total fines reported in FINRA’s monthly Disciplinary and Other FINRA Actions reports and news releases, were:

— Trade Reporting: $7.6 million in fines (72 cases);

— Short Selling: $4.2 million in fines (21 cases);

— Anti-Money Laundering: $2.4 million in fines (20 cases);

— Best Execution: $2.3 million in fines (25 cases); and

— Suitability: $2.2 million in fines (30 cases)               

Brian Rubin, head of Sutherland’s Washington litigation practice group, said in releasing the findings that “despite significant decreases in certain areas that appear to have been priorities in 2014, the first six months of 2015 indicate that FINRA will assess substantial fines this year, even if FINRA does not match 2014’s total fines.”

To avoid sanctions, Rubin stressed that firms should continue to focus on “nuts-and-bolts issues, such as disclosure, suitability, AML and trade execution.” 

Sutherland found that the number of disciplinary actions reported by FINRA decreased only slightly compared to 2014, with FINRA reporting 553 disciplinary actions during the first six months of 2015 — less than a 1% decline from the first six months of 2014 (558 disciplinary actions). 

The percentage of 2015 cases that involved firms (as opposed to only individuals) was identical to the first six months of 2014 (36% for both years), Sutherland notes.  

There was a drop in the number of “supersized fines” imposed by FINRA this year. FINRA reported six fines of $1 million or more during the first six months of 2015, totaling $17.8 million, compared with five such fines imposed during the same time last year; however, those five cases totaled $20.4 million.

The biggest case thus far in 2015 resulted in a $10 million fine levied against LPL Financial for alleged “widespread supervisory failures,” including failing to timely report trades, deliver millions of trade confirmations to customers, and properly supervise the sales of variable annuities, real estate investment trusts and exchange-traded funds. LPL was also ordered to pay $1.7 million in restitution to customers. 

FINRA also ordered $8.3 million in restitution during the first six months of 2015, a significant drop from the $52 million ordered in 2014 (but an increase from the $5.9 million in restitution FINRA ordered during the first six months of 2014).

“There is often a significant increase in the fines and restitution reported late in the year,” Rubin notes.

Keep reading to see how last year’s biggest fine categories are stacking up this year:

Source: Sutherland Asbill & Brennan

— Check out FINRA’s 5 Biggest Fine Categories in 2014 on ThinkAdvisor.


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