During 2014, the Financial Industry Regulatory Authority (FINRA) more than doubled the fines it levied against investment firms over the previous year. It also markedly increased enforcement actions against firms and reps during the year, including more expulsions and suspensions form the industry. The fact that FINRA’s former bark now has much more of a bite was made clear in the most recent installment of annual analyses done by the law firm of Sutherland Asbill & Brennan.
Banner Year for FINRA Fines
Compiled from filings, news reports and other sources, the law firms’ data shows that FINRA:
- Hit firms with fines of roughly $135 million 2014.
- Increased by fines by 125% over the $60 million it assessed in 2013
- Fine totals were the highest since the financial crisis in 2008
Taking Bigger Bites
Foreboding trends that emerged in the analysis include an increase in the average size of FINRA fines (a much higher 2014 fine total despite a 9% reduction in disciplinary actions filed). There were also the ominous “supersized” fines parceled out by the agency. The agency assessed 25 of these much larger fines in 2014, totaling over $100 million, including 10 cases that resulted in a fine of at least $5 million.
Stronger Focus on Protecting Seniors and Retirees
In FINRA’s press releases, priority letters, and officers’ speeches, the regulator often cites protection of seniors and retirees as a focus of its enforcement efforts. The regulator was true to its word in 2014 when it assessed $8million in fines for these types of infractions. That’s a whopping increase of more than 3,600% from the $213,000 in fines imposed by FINRA in similar cases in 2013.
Steering Clear
This analysis makes one thing very clear for asset management and wealth advisory firms. FINRA is now a regulatory force to be reckoned with, and running afoul of them carries very real risks of serious fines and other, significant disciplinary actions.
To avoid these negative outcomes, firms should step back and take stock of their oversight and compliance programs, as well as their general operational and management footings. Finding and fixing problems now will help them avoid the nasty financial and reputation bite of a big FINRA fine in the future.
