Finra imposed fewer fines, collected less restitution for harmed investors and conducted fewer enforcement actions last year than it did in 2021, according to an analysis by a securities law firm.
The Financial Industry Regulatory Authority Inc. reported $45 million in fines in 2022 compared to $103 million in 2021, Eversheds Sutherland said in its annual report on Finra disciplinary actions. The high fine total in 2021 was driven by a record penalty against the online brokerage Robinhood. But even if that were removed, the total amount of fines in 2022 would be 2% less than in 2021.
Finra ordered approximately $21 million in restitution last year, which was a 55% decrease from $47 million in 2021. That decline was the result of a decrease in the number of "supersized" restitution orders — those totaling $1 million or more. Finra ordered three of them last year, totaling $17 million, compared to 10 totaling $42 million the previous year.
Total Finra monetary sanctions — fines, restitution and disgorgement — reached $72 million last year, a 52% decrease from $150 million in 2021.
The broker-dealer self-regulator took 463 disciplinary actions in 2022, a 13% decrease from the 534 recorded in 2021 and a 17% decrease from the 560 recorded in 2020.
Eversheds Sutherland based its report on a review of Finra’s monthly disciplinary reports, press releases and online database. The regulator releases its own enforcement statistics in its annual report, which is usually posted over the summer.
Both the law firm’s studies and Finra’s own statistics show a downward trend in enforcement actions since 2017, the year Robert W. Cook took over as Finra CEO.
“It appears that we are still in a kinder, gentler regime,” said Brian Rubin, a partner at Eversheds Sutherland and co-author of the report. “That’s not to say they don’t take significant cases when the circumstances require it.”
Finra said enforcement statistics are only part of the investor protection story.
“The numbers reported, particularly the millions of dollars in restitution ordered through Finra disciplinary actions, demonstrate Finra’s commitment to addressing misconduct and making harmed customers whole,” a Finra spokesperson said in a statement. “But numbers alone can never present a full picture of the effectiveness of a regulatory program. And while statistics may change year to year, what does not change is Finra’s steadfast commitment to protecting investors and the integrity of the markets.”
Looking ahead, the Eversheds report said Finra is likely to bring more cases involving Regulation Best Interest, the broker standard of conduct, this year. The regulator filed only one Reg BI case in 2022. The measure went into force in June 2020.
Finra also is likely to ramp up the number of enforcement actions it takes against firms for violations involving staff business communications on personal devices using messaging apps such as WhatsApp, Signal and WeChat, according to the report. In 2022, Finra conducted 14 cases in this area, resulting in a total of $2.1 million in fines.
“Given Reg BI and off-channel communications violations, we expect to see more cases and higher sanctions in the future,” Rubin said.
Board of Governors picks reflect push for balanced large- and small-firm input
Deal adds investment platform implementation expertise as F2 builds out North American reach.
AI-driven job fears are weighing on retirement confidence, especially among Gen Z and Millennials, Thrivent survey finds
It’s the second time in as many years regulators have penalized Centaurus Financial for lack of compliance with Reg BI.
AI Teammate is embedded within Wells Fargo’s Advisor Gateway desktop platform.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
