Finra disciplinary actions packed $107,000 average punch in 2018

Mar 4, 2019 @ 2:51 pm

By InvestmentNews

Although it brought 638 disciplinary actions last year compared with 1,007 in 2017, the Financial Industry Regulatory Authority Inc.'s fines bit deeper, averaging $107,000 per case, up from $65,000 the year before, according to analysis of Finra's disciplinary actions by the law firm of Eversheds Sutherland.

Anti-money laundering cases resulted in the most fines assessed, the firm found, followed by cases involving suitability and variable annuities.

(More: UBS hit with $15 million in fines, penalties for AML problems)

Total fines levied by Finra — $68 million — were just slightly above the $65 million imposed in 2017, the analysis found.

AML maintained its top spot for the third year in a row due in part to 2018's largest single fine of $10 million, which was assessed on Morgan Stanley. "The firm's surveillance system allegedly did not receive data from several systems, undermining its surveillance of wire and foreign currency transfers," the analysis stated.

While Finra reported fewer suitability cases — 91 versus 98 — the cases resulted in $11.8 million in fines, up from $3.6 million in 2017. This pushed suitability into the top tier of issues for the first time since 2015.

In connection with variable annuities, Finra reported 28 cases for a total of $8.1 million in fines, up from 23 cases and $2 million in fines in 2017. Restitution in VA cases jumped to $8.7 million from $428,000 in 2017.

While total restitutions were lower — $31 million versus $67 million in 2017 — and well below the record of $96 million reported in 2015, "the decrease is less pronounced when Finra's overall monetary sanctions are analyzed," the study said, noting that in 2018, monetary sanctions (fines, restitution, and disgorgement) totaled $124 million. This compares with sanctions of $150 million in 2017, $207 million in 2016, and $193 million in 2015.

(More:SEC, Finra nab two firms for AML violations)

The analysis also found that many of Finra's largest fines are brought in the second half of the year, often in year-end cases. In 2018, reported fines totaled $42 million in the second half, compared to $26 million in the first half. Last year, Finra fined four firms $21 million in December alone, representing nearly one-third of the total fines for the year.


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