Top Five FINRA Fines from 2017

While fines issued by FINRA may have dropped significantly in the past year, according to a recent report by Eversheds Sutherland, 2017 was a record shattering year for restitution, resulting in the fourth highest total sanctions assessed by FINRA over the past 10 years.

FINRA reported restitution of approximately $66 million in 2017, an increase of 136% from the $28 million in restitution reported in 2016. However, this significant number is still below the record of $96 million reported in 2015.

The fines reported by FINRA in 2017 decreased significantly to $73 million from the record-setting fines of $176 million in 2016, a 58% decrease. The 2017 fines were also 22% less than the $94 million in fines reported in 2015. Despite this shortfall, fines have increased by 161% since 2008, when FINRA delivered fines totaling $28 million.

The number of cases reported by FINRA also decreased in 2017. FINRA reported 1,008 disciplinary actions in 2017, a decrease of approximately 16% from the 1,201 cases FINRA reported in 2016. The number of individuals barred or suspended and firms expelled decreased from 517 in 2016 to 214 in 2017, a 59% decrease. The number of firms expelled by FINRA decreased by 75%, while the number of individuals suspended decreased about 43%.

Listed below are the top FINRA enforcement fines issued for 2017 measured by total fines assessed.

Top Enforcement Fines

1.) Anti-Money Laundering: Anti-money laundering cases resulted in the most fines for FINRA in 2017. This is the second year in a row that AML has been at the top of the enforcement issues list and the fourth year in a row that it has appeared on it. FINRA reported 16 AML cases in 2017, which resulted in $14.6 million in fines. While the number of cases decreased by 50% from 32 in 2016, the fines reported also dropped from $45.9 million in 2016, a decrease of 68%.

2.) Trade Reporting: Trade reporting cases resulted in the second-most fines for FINRA in 2017, up from its number three spot on the list from last year. This is the fifth year in a row that trade reporting has appeared on this list. In 2017, FINRA reported $14.3 million in fines in 112 trade reporting cases.

3.) Electronic Communications: Electronic communications cases resulted in the third-largest amount of fines assessed by FINRA. This is the first time that electronic communications cases have been on the list of top enforcement cases since its first-place finish in 2013. In 2017, FINRA reported $8.3 million in fines for 44 electronic communications cases.

4.) Books and Records: For the second year in a row, books and records appeared on Sutherland’s list. FINRA reported 81 books and records cases in 2017, which resulted in $6.2 million in fines. The majority of these fines stemmed from failing to preserve records in a WORM format.

5.) Research Analyst and Research Report: This is the first time that this issue has been on the list of top enforcement issues since its first-place finish in 2014. FINRA reported 10 research analyst and research report cases in 2017, which resulted in a total of $6 million in fines.

The dramatic increase in restitution was one of the key FINRA enforcement trends in 2017. There were nine “supersized” restitution orders, totaling nearly $55 million, of which three totaled at least $40.4 million. As noted by Sutherland, this increase in restitution may signal that FINRA intends to order more customer remediation rather than assess punitive sanctions against firms.

To read the complete Sutherland report, click here.

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