Sutherland Reveals Increased Sanctions in 2015

FINRA imposed record sanctions in 2015, ordering firms to pay significantly more in restitution and expelling more firms than the year prior, according to Sutherland’s annual report.

The regulator ordered firms to pay $96 million in restitution, an increase of 200% from the $32 million ordered in 2014. Additionally, the overall sanctions imposed by FINRA, including fines and restitution, increased from $166 million in 2014 to $190 million in 2015. The amount of fines, however, dropped from $134 million in 2014 to $94 million in 2015, although this was still the second highest amount since the financial crisis.

The number of disciplinary actions reported rose from 1,397 in 2014 to 1,462 in 2015, an increase of nearly 5%. FINRA suspended 737 individuals in 2015 – a 5% increase over the year prior – and barred 492 people, a 2% increase since 2014.

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Below are the top five biggest fine categories in 2015:

1.) Trade reporting: This is the third year in a row that trade reporting has appeared on Sutherland’s Top Enforcement issues list. In 2015, FINRA reported $30.3 million in fines in 159 trade reporting cases. These figures represent a 173% increase in fines (from $11.1 million) and a 10% decrease in the number of cases from the 176 reported in 2014. The substantial increase in fines was due in large part to a settlement that resulted in a $10 million fine stemming from widespread supervisory allegations, including FINRA’s claim that the firm failed to accurately report trade information to the OCC and the RTRS in approximately one million instances.

2.) Anti-money laundering: FINRA reported 36 AML cases in 2015, which resulted in $20.6 million in fines. The number of cases increased by 6% from 34 in 2014 to 36 in 2015, but the fines reported jumped from $13.2 million in 2014 to $20.6 million in 2015, an increase of 56%. In 2014, AML placed fourth on Sutherland’s Top Enforcement Issues list, which was the first time the issue had been ranked in the top five. AML has always been an important issue for FINRA and these cases have now resulted in substantial fines in back-to-back years [To view Quest CE’s AML course catalog click here].

3.) Suitability: FINRA reported 76 suitability cases in 2015, which resulted in $18.3 million in fines. This was a 227% increase from the $5.6 million in fines reported in 2014, but the number of cases barely changed from the 75 reported in 2014 compared to 76 cases in 2015. In addition to significant fines, 2015 suitability cases also resulted in $28 million in restitution, a 1,117% increase from the $2.3 million imposed in 2014 suitability cases.

4.) Forms U4, U5, and 3070: FINRA reported 154 cases involving Forms U4, U5, and 3070 allegations, which resulted in $13 million in fines. These figures represent a 16% increase from the 133 cases reported in 2014 and a 665% increase from the $1.7 million in fines reported in 2014. This substantial increase was largely driven by the $10 million wide-spread supervision case referenced above, which included allegations that the firm failed to timely file or amend more than 100 Forms U4 or U5.

5.) Advertising: FINRA reported 36 advertising cases in 2015, which totaled $11.8 million in fines. This was an increase of 16% from the 31 cases reported in 2014 and a decrease of 31% from the $17.2 million in fines reported in 2014. Advertising cases have frequently been a key enforcement focus for FINRA in recent years. Advertising cases placed second on Sutherland’s Top Enforcement Issues list in 2014, fourth in 2012, and first in both 2010 and 2011.

To read the complete Sutherland report, click here.

To browse Quest CE’s 2016 Firm Element course catalog, click here.