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March 03, 2017 at 04:39 AM
Fines ordered by the Financial Industry Regulatory Authority in 2016 shattered the self-regulator’s previous record in 2014 – jumping to a record high of $176 million, an 87% increase from the $94 million reported in 2015 and a 31% jump from the former record of $134 million reported in 2014.
That’s according to Eversheds Sutherland’s annual review of FINRA’s monthly disciplinary reports and press releases.
The law firm, formerly Sutherland, Asbill & Brennan, also found that the top FINRA enforcement issues for 2016 measured by total fines assessed included anti-money laundering, variable annuities, trade reporting, books and records and unregistered securities.
“If firms and their representatives weren’t paying attention to this [fines] trend, they should be now,” said Brian Rubin, co-author of the FINRA study and a partner at Eversheds Sutherland. “Although some have speculated a reduction in the Securities and Exchange Commission’s enforcement program with the new administration, FINRA shows no signs of slowing down.”
The increase in 2016 fines was principally due to the “significant rise in the size and number of what we call ‘supersized’ fines of $1 million or greater and what we call ‘yuuuge’ fines of $5 million or greater,” Rubin and associate Adam Pollet found.
In 2015, 18 “supersized” fines were assessed, totaling $52.2 million. In 2016, however, 34 “supersized” fines were assessed, totaling more than $137 million. Of those, eight were “yuuuge” fines, totaling nearly $89 million, the report states.
“This trend signals that FINRA will continue to assess substantial fines against firms even where there is limited or no measurable harm to customers,” Rubin and Pollet wrote.
Compliance officers were also in FINRA’s crosshairs in 2016, with FINRA cracking down on individual compliance officers in addition to their firms. The report found that 27 cases involved some type of sanction against a firm’s compliance officer, with some of these compliance officers also acting in other capacities such as firm president or CEO.
Also, according to the report, while fines jumped significantly and restitution decreased in 2016, the number of cases reported by FINRA decreased slightly last year.
