Fines imposed by the Financial Industry Regulatory Authority for violations of regulations declined last year despite the fact that the number of cases decided remained almost the same, according to an analysis of Finra actions by Sutherland, Asbill and Brennan LLP, a Washington, D.C., law firm.
Fines levied by the self-regulator of securities firms declined to $57 million from $78 million in 2012 although the number of cases initiated by Finra only dropped from 1,541 in 2012 to 1,535 last year. Sutherland conducts an annual review of Finra statistics.
The fines and numbers of cases pursued by Finra have varied widely over the nine years that Sutherland has done its review. The largest fines by far were in 2005 and 2006 when they were $184 million and $111 million respectively. At the same time, the number of cases was also the highest in those years with 1,412 filed in 2005 and 1,204 in 2006.
The lowest amount of fines and number of cases occurred in 2008 when 1,073 cases resulted in $28 million in fines.
In addition to the fines assessed by Finra in 2013, the regulator also ordered firms and their representatives to pay $23.9 in restitution in 2013, a decrease from 2012’s record breaking $34 million.
The fines for last year decreased although the number of cases remained virtually equal because Finra has processed the cases resulting from the 2007 to 2008 financial crisis, according to Sutherland partner Brian Rubin. Finra is now processing more basic cases that don’t generate high fines, he says.
Electronic communications cases dominated Finra headlines in 2013 as the financial industry registered a significant uptake in this form of communication, according to Sutherland. The largest fine assessed last year was for $7.5 million for a firm that violated regulations in its retention and surveillance of emails.
Firms need to focus on technology issues, like email retention and surveillance, because Finra is now concentrating on the issue, warns Sutherland associate Andrew McCormick.
Trade reporting cases resulted in the second-highest amount of fines for FINRA in 2013. Although most of these cases led to relatively small fines, there were 198 trade reporting cases in 2013, totaling $12.1 million in fines compared to 158 trade reporting cases that resulted in $7.7 million of fines the year before.
Short selling and violations of regulations regarding books and record keeping accounted for the third and fourth highest amount of fines.