FINRA’s Overall Sanctions: The Dramatic Increase in 2015

According to an annual analysis of FINRA sanctions released by law firm Sutherland Asbill & Brennan LLP, overall sanctions from the regulator increased dramatically in 2015. That’s because the amount of restitution (payments for harmed investors) ordered by FINRA tripled, even though fines declined from 2014’s total.

In 2015, the overall sanctions imposed by FINRA increased significantly due to $96 million of restitution reported. This restitution amount was a new record for FINRA and an increase of 200% from the $32 million ordered in 2014.

This explosive increase is a strong sign from FINRA that the regulator will take significant steps to require firms to repay customers who are allegedly harmed. As evidence of this growing trend, in 2014 and 2015, FINRA ordered a total of $128 million in restitution. In contrast, in 2009 and 2010, FINRA ordered restitution equaling only $14 million.

FINRA imposed fines of approximately $94 million in 2015, a decrease of 30% from the $134 million in fines reported the previous year. Despite this decrease, it was still the second-largest amount for fines imposed by FINRA since the financial crisis in 2008.

The charts below shows the fines and the number of disciplinary actions FINRA reported dating back to 2008:

FINRAs Sanction Statistics 2008 2015 1

FINRA2016Table2

“This was FINRA’s biggest year since the financial crisis and firms and their representatives should take notice,” said Sutherland Partner Brian L. Rubin. “The amount of fines and restitution ordered by FINRA has increased significantly during the last two years and the regulator does not appear to be slowing down.”

The top five FINRA enforcement issues for 2015 measured by total fines assessed included:

  1. Trade reporting cases, where firms were fined for administrative or technical issues of concern to FINRA.
  2. Anti-money laundering cases, where firms allegedly failed to have either adequate detection, monitoring, or investigation of suspicious trades.
  3. Suitability cases, where firms and their brokers, advisors, or consultants allegedly didn’t deal fairly with their customers.
  4. Forms U4, U5, and 3070 cases, regarding firms’ reporting obligations.
  5. Advertising cases, where firms allegedly had improper communication with the public in promotions and advertisements.

It’s essential to get your firm set up with the best FINRA compliance practices and procedures to avoid being one of those hit with large fines in the coming years. Supportive technology, including a comprehensive archiving solution, like The Archiving Platform™ from Smarsh, can help your firm supervise its digital communications−an important part of the big picture in meeting FINRA’s expectations.

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