While the Financial Industry Regulatory Authority continues to zero in on abuses involving mutual fund share classes and senior financial fraud, restitutions ordered by the self-regulatory organization are way up while fines levied and the number of disciplinary cases pursued in the first half of 2017 are way down, according to a just-released analysis by Eversheds Sutherland.
To compile the data, Eversheds reviewed FINRA’s monthly Disciplinary and Other FINRA Actions publications and press releases from January through June 2017.
FINRA ordered $38.1 million in restitution during the first six months of 2017, a pace, that if continued will likely result in 2017 year-end restitution nearing $76 million — a 171% increase from the total restitution reported in 2016 ($28 million) and a 21% decrease from the record-setting amount in 2015 ($96 million), according to the Evershed’s annual midyear analysis of the disciplinary actions reported by FINRA.
Brian Rubin, head of Eversheds Sutherland’s Washington DC Litigation Practice Group, told ThinkAdvisor on Monday that the restitution figures “are skewed”: Of the $38.1 million in restitution during the first six months, the overwhelming majority ($24.6 million) is attributable to one litigated case.
“If that number is taken out, the restitution would have totaled $13.5 million. If we extrapolate that number, we get $27 million for the entire year. That figure puts restitution more in line with last year’s total restitution, which was $28 million.”
FINRA’s year-end overall fines look to be on a significant plunge downward, the study notes, with Rubin suggesting that may “be for a variety of reasons, such as [FINRA is] bringing different types of cases or they have heard the industry’s criticisms and they are trying to be ‘kinder and gentler’ regulator.”
During the first half of 2017, FINRA reported $23.5 million in fines compared with $79.4 million during the first half of 2016, a drop of more than 70%, Eversheds Sutherland found.
If the SRO continues at this pace, fines would total approximately $47 million — a 73% drop from the total $176 million in fines reported in 2016, and the lowest total since 2010, when FINRA ordered $42 million in fines.
Disciplinary actions reported by FINRA during the first half of 2017 also plummeted as well compared with 2016.
FINRA reported 459 disciplinary actions during the first six months of 2017, a 16% decline compared with the first six months of 2016 (547 disciplinary actions), the survey said.