FINRA’s Top Five Fine Categories from 2019

Eversheds Sutherland recently completed its annual review of the disciplinary actions reported by the Financial Industry Regulatory Authority (FINRA) in 2019 and they found that fines, restitution and cases decreased compared to 2018.

Fines + Large Fines

According to the report, FINRA fines decreased to $44 million in 2019 from $61 million in 2018, a decline of 28%. Additionally, the number of “supersized” fines also decreased in 2019. FINRA assessed nine fines of $1 million or more, totally approximately $27.9 million.

Restitution

Restitution also decreased in 2019. FINRA ordered restitution of approximately $24 million in 2019, a reduction of 8% from the $26 million in restitution ordered in 2018. The highest restitution ordered by FINRA was in 2015 for $97 million.

Individual/Firm Trends

FINRA reported 591 disciplinary actions in 2019 compared to the 638 disciplinary actions reported in 2018, a decrease of 7%. Additionally, the cases against solely individuals, and not including firms, declined 18% from 2018. The number of individuals barred went down 6% in 2019, while individuals suspended decreased 4%. Similarly, firm suspensions went from 4 in 2018 to 3 in 2019.

In addition to the fine categories list below, several other areas of focus for FINRA last year were 529 plan share classes and market access cases.

Listed below are the top five FINRA enforcement fine categories from 2019:

Anti-Money Laundering

Anti-money laundering cases resulted in the most FINRA fines in 2019. This is the fourth consecutive year that AML has been listed on the Eversheds Sutherland Top Enforcement Issues list and the sixth consecutive year that AML has appeared on the list.

FINRA reported 12 AML cases in 2019, resulting in $17.4 million in fines. These numbers are lower than in 2018 when FINRA reported 17 AML cases, totaling $27.3 million in fines.

Exchange Traded Funds/Products

Exchange Traded Fund/Products cases resulted in the second most fines for FINRA in 2019. This is also the first time ETFs/ETPs have made the Eversheds Sutherland Top Enforcement Issues list since last appearing in 2012. FINRA reported 13 ETF/ETP cases, with $3.5 million in fines in 2019.

The number of cases increased 30% from the 10 cases brought in 2018, while fines increased by 218% from $1.1 million reported in 2018.

Misleading or Inaccurate Information

Cases involving misleading or inaccurate information resulted in the third most fines for FINRA in 2019. This is the first time misleading or inaccurate information has made the Eversheds Sutherland Top Enforcement Issues list.

FINRA reported 28 misleading or inaccurate information cases, with $3.3 million in fines in 2019. The number of cases decreased 18% from the 34 cases brought in 2018, although the fines increased 83% from $1.8 million reported in 2018.

Municipal Securities

Municipal Securities cases resulted in the fourth most fines for FINRA in 2019. The last time municipal securities cases made the Eversheds Sutherland Top Enforcement Issues list was in 2013. FINRA reported 8 municipal securities cases, with $2.7 million in fines in 2019.

The number of cases increased 11% from 9 cases brought in 2018, while fines increased 50% from $1.8 million reported in 2018.

Suitability

Suitability cases resulted in the fifth most fines for FINRA in 2019. This is the second year in a row that suitability cases have been on the Eversheds Sutherland Top Enforcement Issues list. FINRA reported 45 suitability cases, with $2.7 million in fines in 2019.

The number of cases decreased 51% from 91 cases brought in 2018, while fines decreased 77% from $11.8 million reported in 2018.