Finra’s Record Haul in 2016

• Posted on: Nov 25 2016

What is the amount of fines assessed by Finra this year?

Thus far, 2016 has been a banner year for the Financial Industry Regulatory Authority (“FINRA”). Buoyed in part by a handful of large penalties, the self-regulatory watchdog is on pace for a record year as fines could be up by 70 percent when all is said and done.

In the first six months of this year, FINRA assessed $79.4 million in fines against member broker-dealers. For the similar period in 2015 that figure was $37.5 million. If this clip continues, FINRA could net $159 million in fines, a 69 percent spike over 2015. This is not without precedent, however, because the previous record was in 2014, when the total amount of fines assessed was $134 million. That said, this year’s total could eclipse that mark by 19 percent.

Large Finra Fines in 2015

As we have previously reported in May, FINRA fined two units of Raymond James a total of $17 million over compliance breakdowns related to its anti-money laundering programs. At that time, FINRA also slapped MetLife with a $25 million fine, the second largest by the SRO,  for misleading thousands of its variable annuity customers. We also reported on the $6 million penalty assessed to Deutsche Bank over blue sheet lapses.

Combined, these fines account for more than 60 percent of the fines assessed in the first 6 months of 2016, in addition to 8 other supersized fines (those exceeding $1 million). However, there has been a slight decline in the total number of disciplinary actions taken by FINRA this year even though smaller fines on broker-dealers are having a cumulative effect.

Finra Sanctions Guidelines

According to some observers, FINRA has taken a very aggressive approach since it published the 2015 sanctions guidelines, and is sending a message to the Street. However, FINRA has not been as busy on the restitution front so far. It is on pace to order a return of $28 million to customers, far less than the $96 million in restitution ordered in 2015.

These figures are bound to change as FINRA is reportedly gearing up for larger restitution awards this year. While not offering specific details, there could also be a greater emphasis on variable annuity cases this year. It is unclear if these cases are connected to the efforts to step up enforcement activity with respect to elder financial abuse.

The Takeaway

Given that the Dodd-Frank regime has continued to unfold, the spike in fines assessed by FINRA this year should come as no surprise. At this juncture, it is unclear if and to what extent that regulatory framework will be scaled back under a new presidential administration. (This Blog recently discussed possible implications with respect to the SEC whistleblower program here.) In the meantime, broker-dealers and other member financial services providers should proceed with caution. 

Tagged with: Securities Arbitration