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FINRA Fines Heating Up

Monday, August 11, 2014

Summer temperatures in Texas are heating up almost as fast as the Financial Industry Regulatory Authority’s (FINRA’s) monthly “Disciplinary and Other FINRA Actions” publication. Reported recently by ThinkAdvisor.com citing an analysis by the law firm Sutherland Asbill & Brennan (Sutherland), FINRA is on track to assessing 49% more in fines this year than last year’s $57 million.

The first half of 2014 has already seen fines totaling $42.4 million compared with $23 million during the first half of 2013. At the current rate, fines in 2014 will total approximately $85 million which is still lower than the $111 million reported by FINRA in 2006. The Sutherland study also noted that FINRA “appears to be repositioning itself as its actions shift from cases relating to the financial crisis to more technical issues,” such as books and records and trade reporting violations.

Issues drawing the most heat so far this year are:

  • Books and Records: $13.7 million in fines, 61 cases
  • Anti-Money Laundering: $11.3 million in fines, 17 cases
  • Net Capital: $9.7 million in fines, 18 cases
  • Unregistered Securities: $9.2 million in fines, 11 cases
  • Trade Reporting: $6.7 million in fines, 92 cases

One reason noted by Sutherland for the higher total is that fines themselves have been higher in 2014 than 2013. During the first half of 2013 there were only two fines of $1 million or more totaling $2.3 million. So far this year there have been five fines totaling $20.4 million. One anti-money laundering compliance failure case involving penny stock transactions resulted in an $8 million fine.

The study by Sutherland also found that as fines are heating up, disciplinary actions are cooling off . . . slightly. Fines are up 49% so far this year and disciplinary actions are down about 7% with 558 actions during the first half of this year (597 during first half of 2013). Please click here to ready the full article.

While there is not much we can do about the temperature, Red Oak stands ready to help you and your firm keep your cool year round.

About Red Oak Compliance Solutions

Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.

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