FINRA’s “Top Five” Biggest Fines from 2016

According to a recent report conducted by Eversheds Sutherland, 2016 was a record shattering year for FINRA fines, surpassing last year’s total by 87% and breaking the previous record set back in 2014.

FINRA reported a record-high $176 million in fines. This amount was a 31% increase from the former record of $134 million reported in 2014. In comparison, while fines increased, restitution decreased significantly in 2016, reporting restitution of $28 million in 2016, a decrease of 71% from the record of $96 million reported in 2015.

Despite the increase in fines, the number of cases reported by FINRA (1,434) decreased by 2%. Additionally, the number of individuals barred increased from 492 in 2015 to 517 in 2016, while the number of firms expelled and individuals suspended decreased.

Year

Fines Reported

Disciplinary Action

2012

$69 million 1,541

2013

$60 million

1,535

2014

$134 million

1,397

2015

$94 million

1,462

2016 $176 million

1,434

Top Enforcement Fines

Listed below are the top FINRA enforcement fines issued for 2016 measured by total fines assessed.

  • Anti-Money Laundering: For the third year in a row, AML was a top fine category for FINRA. In 2016, FINRA reported 32 AML cases, which resulted in $45.9 million in fines. The number of cases decreased by 11% from 36 in 2015, but the fines reported soared from $20.6 million in 2015, an increase of 123%.
  • Variable Annuities: For the first time since 2009, variable annuities landed a stop on Sutherland’s “top enforcement issues” list. In 2016, FINRA reported $30.3 million in fines for 30 variable annuities cases. Compared with 2015, these figures represent a 191% increase in fines from $10.4 million and a 20% increase in the number of cases from 25.
  • Trade Reporting: Number three on the list is Trade Reporting, down from its number one spot on last year’s list. In 2016, FINRA reported $24.4 million in fines in 146 trade reporting cases. Compared with 2015, these figures represent a 19% decrease in fines from $30.3 million and an 8% decrease in the number of cases from 159.
  • Books and Records: For the first time, books and records appeared on Sutherland’s list. FINRA reported 99 books and records cases in 2016, which resulted in $22.5 million in fines. Compared to 2015, these figures represent a 423% increase in fines from $4.3 million and a 7% decrease in the number of cases from 106.
  • Unregistered Securities: The fifth most reported fine category in 2016 was unregistered securities. FINRA reported 32 unregistered securities cases in 2016, which resulted in a total of $18.4 million in fines. This was an increase of 581% in fines from $2.7 million reported in 2015 and an increase of 39% from the 23 cases reported in 2015.

Last year’s explosive increase in fines was due in large part to the significant rise in “supersized” penalties. In 2015, 18 supersized fines were assessed, totaling $52.2 million. In 2016, however, 34 “supersized” fines were assessed totaling more than $137 million.

Another trend in 2016 was the enforcement of compliance officers. In 2016, 27 cases involved some type of sanctions against a firm’s compliance officer. It should be noted, however, that a large majority of these individuals wore “multiple “hats.”

While suitability failed to make Sutherland’s list this year, FINRA still reported 87 suitability cases in 2016, totaling $15.3 million. The number of cases increased 14% from the 76 cases brought in 2015, but the fines decreased 16% from the $18.3 million reported in 2015.

To read the complete Sutherland report, click here.

To browse Quest CE’s 2017 Firm Element course catalog, click here.