Customers filed 3,208 complaints last year either online or through the mail with Finra. Every complaint was reviewed, responded to and investigated when warranted, Condon said.
The total amount of fines brought by Finra was about $42.5 million in 2010, compared with about $1.03 billion by the SEC last fiscal year. The SEC figure includes a $535 million penalty for Goldman Sachs Group Inc. to settle claims that it misled investors in collateralized debt obligations linked to subprime mortgages. The SEC doesn't break out separate numbers for fines of brokers, said John Nester, a spokesman for the SEC. Finra may refer cases to the SEC, which has civil law enforcement powers.
Finra also ordered $6 million in restitution to harmed investors last year. That compares with about $1.82 billion in illegal profits that the SEC has ordered repaid and returned to investors when possible. This year through May, Finra restitution was $9.8 million. The self-regulator has almost as much funding as the SEC, which had a budget of $960 million in 2009.
'Nasty Blow'
"When you look at the types of misconduct compared to the fines, you have to wonder if it will really deter the misconduct they're tasked with cracking down on," said Michael Smallberg, an investigator at the Washington-based nonprofit Project on Government Oversight. "Would Finra ever take serious action against who it's relying on for its funding?"
Richard and Anne Laese, retirees in Casselberry, Florida, sunk $250,000 into Provident oil and gas partnerships on the advice of John Michael Leonard, a broker who worked for brokerage firm Workman Securities Corp. Most of the high-yield investments turned out to be worthless when the SEC sued Provident for fraud in July 2009. Provident is in receivership and the SEC settled its case against the firm in March.
"We're not rolling in dough," said Richard Laese, a 72- year-old former police officer. "It was a pretty nasty blow." The Laeses settled with Workman last year for $81,250.
Credit for Claims
Workman didn't conduct adequate due diligence of the Provident and Medical Capital securities and kept selling the Medical Capital notes even after it found out that Medical Capital was missing interest payments, Finra said in its settlement with the firm. The firm sold $9.3 million of certain Provident and Medical Capital notes, Finra said.
Finra ordered Workman, based in Eden Prairie, Minnesota, to repay $700,000 to investors and allowed Workman to count the $642,802 it had already paid to settle claims toward its sanction.
"We were settling cases for business reasons," said Benjamin Skjold, a lawyer in Minneapolis who represents Workman. "I presume they looked at our overall business methodology and how we were resolving claims and said, 'We would rather encourage this kind of behavior.'"