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FINRA’s Top 5 Fine Categories in 2020

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Fines reported by the Financial Industry Regulatory Authority in 2020 increased to $57 million from $40 million in 2019, a 43% increase, according to just-released data by the law firm Eversheds Sutherland.

The cases in 2020 demonstrate FINRA’s focus on protecting retail investors, according to Brian Rubin, head of the firm’s Securities and Exchange Commission, FINRA and state securities enforcement practice, and Adam Pollet, a partner in the practice.

The two attorneys compiled their report by studying FINRA’s monthly disciplinary reports, press releases and online database.

Cases relating to retail-type products (e.g., variable annuities, mutual funds, 529 plans), suitability and providing misleading information to the public totaled 60 cases, $8.5 million in fines and $25.9 million in restitution, the Eversheds attorneys found.

“Taking a page out of the SEC’s playbook, in January 2019, FINRA launched a self-reporting initiative focused on 529 plan share classes,” Rubin and Pollet state. “FINRA was concerned that some firms may not have adequately supervised their representatives in considering the various fee structures when making 529 plan recommendations to customers.”

At the end of 2020, FINRA released an interim progress report on its initiative.

As of Dec. 30, FINRA had settled with two firms and resolved 17 other matters through cautionary action letters, resulting in more than $2.7 million in restitution and interest to customers owning approximately 3,900 accounts, the attorneys reported.

“FINRA will likely release additional results relating to this initiative in 2021 that may boost its enforcement statistics,” they wrote.

Read the galley above to see FINRA’s top 5 enforcement issues for 2020, measured by total fines assessed, as compiled by Eversheds Sutherland.