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Total FINRA Fines Drop for First Half of 2015

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Total FINRA fines are down for the first half of this year to $37.5 million, but not far off last year's historic high, according to the newest installment of a recurring study by the law firm Sutherland Asbill & Brennan.

Total fines imposed by the industry regulatory organization against registered representatives dropped about 12% for the first half of this year compared with the same time last year, from $42.4 million for the first six months of last year, the study found.

The number of overall cases, however, held nearly steady at 553 cases this year, so far, versus 558 over the same time period last year.

Firms drew fines for supervisory failures, problems with trade reporting, short-selling missteps, anti-money laundering lapses, best execution problems and suitability issues, the firm found.


"I think because we are a few years removed from the market crisis or the great recession, FINRA is focusing more on bread-and-butter type issues," says Brian Rubin, head of the firm's Washington litigation practice and one of the study's authors.

"Just by way of example, in 2011 among the priorities were short selling and option rate securities," Rubin explains. "And a few years earlier there were market-timing cases so, again, what's happening in the market sort of drives what FINRA thinks is important."

Given the fact that cases can take years to resolve, an analysis of the regulator's publicly announced fines offers an imperfect barometer of the overall magnitude of fines and their meaning, Rubin acknowledges. One large case can skew the numbers in any year.

FINRA reported six “supersized” fines of $1 million or more for a total of $17.8 million in the first six months of this year.

By contrast, FINRA reported five supersized fines for a cumulative $20.4 million in the first six months of last year. 


Both this year and last saw large jumps in cases of this size compared with the first six months of 2013, during which time period only two firms drew million-dollar-plus fines for a total of $2.3 million.

Anti-money laundering cases are on the rise and, Rubin expects there will be still more going forward.

It "seems to be a higher priority than it has been in years past, although the fines were not what it was a year ago because there was one substantial fine last year. The number of cases is expected to increase significantly this year," Rubin says, because FINRA is conducting more examinations with an eye to uncovering these transgressions.

Cybersecurity problems also have yet to produce substantial fines, but that could change.


"FINRA and the SEC have been looking at cybersecurity issues for the past year or year and a half and we haven't seen many cases stemming from those sweep exams," Rubin says, but "in the next year or two I expect we will see enforcement actions."

FINRA also ordered $8.3 million in restitution during the first six months of 2015, an increase over the $5.9 million in the same period last year, the study found. However, there is often a significant increase in the fines and restitution reported late in the year, study authors say. By the end of 2014, FINRA had ordered $52 million in restitution.

Despite the overall drop in fines this year, if new cases stay on pace, Rubin says FINRA is still on track to post the second-highest year in fines since the financial crisis.

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