SuperSized Fines

Supersized fines are the next big thing in regulatory enforcement. 

FINRA sanction fines jumped from a reported $60 million in 2013 to $135 million in 2014, while the number of disciplinary actions dropped.  Restitution to customers and others shows a quadruple increase from 2013 to 2014 going from $10 million to $52 million. What happened?

The rise in regulatory fines

The Breakdown

Research, Analysis and Reporting: Cases against firms and individuals in this area spiked for 2014 with over $59 million in fines against 19 cases. The most significant difference was fines increased 5800%, from just $1 million in 2013; $15 million of which was against 1 firm.

Advertising: The second highest category with 31 cases and $17 million in fines was in advertising. Notably, the number of cases for advertising dropped by 40% while fines increased 514%; marking advertising as an important compliance issue as new products are brought to market.

Best Execution: Best execution is not just an ethical issue; it is the law. Still, best execution cases were cited as the 3rd largest category of fines at $14 million, an increase in 112% from 2013. Broker firms can expect more emphasis on these transactions in forthcoming audits.

Anti-Money Laundering: The AML landscape shows a slight decrease in AML cases between 2013 and 2014. This would be good news; however fines increased from $5 million to $8 million. AML is expected as another hot trending audit area for 2015.

Trade Reporting: Slowing down on the trend chart are trade reporting cases; showing a slight dip in cases initiated and an 8% decrease in fines.  The high focus for trade reporting cases however still shows precedence that FINRA does not tolerate administrative and technical mistakes.  

Read the Annual Sutherland Analysis of FINRA Sanctions – release February 2015


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