Eversheds Sutherland recently completed its annual review of the disciplinary actions reported by the Financial Industry Regulatory Authority (FINRA) and found that in 2020 the amount of fines, restitution and cases increased compared with 2019, reversing the downward trend from the past few years – even in the midst of the COVID-19 pandemic.
Fines + Supersized Fines
The fines reported by FINRA in 2020 increased to $57 million from $40 million in 2019, a 43% increase. This increase halts a recent trend, representing the first increase since the record-setting year in 2016 when FINRA ordered $174 million in fines. With the increase in fines, the number of cases with very large fines also increased slightly in 2020. FINRA assessed ten fines of $1 million or more (what FINRA calls “supersized” fines), totaling $38.6 million. In contrast, in 2019, FINRA assessed nine “supersized” fines, totaling $28 million.
In 2020, restitution ordered by FINRA also increased. FINRA ordered restitution of approximately $36 million in 2020, up 29% from the $28 million in restitution ordered in 2019 and up 38% from the $26 million ordered in 2018.
The total monetary sanctions ordered by FINRA (fines, restitution and disgorgement) in 2020 were $94 million. This represents a 34% increase from the $70 million in total sanctions ordered in 2019. The total sanctions ordered in the preceding years were significantly higher, however: $124 million in 2018; $150 million in 2017; and $207 million in 2016.
Firm/Individual Disciplinary Actions
FINRA reported 595 disciplinary actions in 2020, a one percent increase from the 591 disciplinary actions in 2019. The percentage of cases against just firms (as opposed to cases against individuals or jointly against both firms and individuals) was 23%, increasing from 18% during 2019. FINRA barred 158 individuals in 2020, a 55% decrease from the 348 reported in 2019. The number of individuals suspended also decreased 35% to 271 in 2020 from 415 in 2019. The number of firms expelled by FINRA decreased to two in 2020 compared with six in 2019.