Finra uses fine proceeds of $48.1 million to help fund improvements

Finra allocated the money it collected in fines last year, totaling $48.1 million — augmented by funds from its reserves and operating revenue — to bolster its examination and enforcement efforts, the broker-dealer self-regulator announced Wednesday.

In its annual report on the use of its fine proceeds, the Financial Industry Regulatory Authority Inc. said that it collected $48.1 million in fines in 2022. But the organization determined there was a total of $111.4 million in projects that could be funded with fine monies, such as capital initiatives, investor education and reserves replenishment.

Finra dipped into its reserves — or investment accounts — and excess operating revenue to add $63.3 million to its $48.1 million in fines to finance the total $111.4 million in spending tied to fine collections.

The $111.4 million total was split in two ways. The regulator spent $89.2 million on capital initiatives to upgrade technology and data management to improve Finra’s oversight of member brokerages and their compliance with Finra rules. The other $22.2 million was allocated to investor education.

The $52.2 million spent on examinations and enforcement capital initiatives included $17.5 million to build a centralized data services and analytics platform. Another $17.1 million was invested in tools and systems to improve investigations of brokers with a history of misconduct. Other spending in this pool was targeted at digital aspects of enforcement and on risk monitoring.

Additional capital spending included more than $16 million to enhance Finra’s monitoring of market trading and $13.4 million to improve its compliance filing systems.

“The fines-eligible expenditures … furthered Finra’s goals to implement efficient oversight programs that protect investors and the markets; modernize critical securities industry infrastructure; strengthen the ability to track trading across markets; enhance examination, investigation and disciplinary programs; enhance the efficiency of Finra systems; facilitate compliance by member firms; equip investors with knowledge and resources to help them navigate ever-evolving markets, products and services; and expand training to ensure staff is prepared for new regulatory challenges,” Finra said in the report on how it spent fine proceeds.

Finra has issued the fine-spending report annually since 2017. It was originally published as part of the Finra 360 initiative to make the organization’s finances more transparent.