Is the
Financial Industry Regulatory Authority Inc. ginning up its enforcement engine once again?
Last year, the regulator took in $50 million in fines and resolved 1,090 disciplinary actions, up from $28 million in fines from 1,007 actions in 2008.
Those numbers, based on a review by the law firm of Sutherland Asbill & Brennan LLP, still trail the fines levied in 2005 ($184 million), 2006 ($111 million), and 2007 ($77 million).
The higher fine totals from 2005 to 2007 were primarily from large mutual fund timing cases, said Brian Rubin, a partner at Sutherland.
It's hard to say whether the industry will see more fines this year, but Sutherland says firms should expect to see the usual mutual-fund and suitability cases.
Finra actions involving mutual funds and suitability topped the list for total fines in 2009, the firm said.
Following those two categories were cases involving variable annuities, licensing and advertising violations.
About two-thirds of the fines for advertising violations arose from auction rate securities cases, Sutherland said. In an unusual twist in these actions, Finra claimed that internal-use-only marketing pieces were misleading.
Finra may be "pursuing a new standard [by] establishing the same risk disclosure requirements for internal-use-only pieces [than for] materials used by the investing public," the law firm said.
Mr. Rubin said he was unaware of any other enforcement cases involving internal marketing materials.
Going forward, Sutherland expects the industry to see more fines arising from cases involving sales to seniors, alternative investments and private placements.
The law firm noted that this year, Finra has taken several actions against members for sales of convertible notes and private placements.
Violations of e-mail retention rules might also grow this year.
In particular, Finra has been looking at firms' "failures to follow up on 'glitches' or 'hiccups' in e-mail retention," the law firm said.
In May, for example, Finra fined Piper Jaffray and Co. $700,000 for failing to retain e-mails due to intermittent technical issues.
