Finra appears to be applying a lighter touch with enforcement actions in 2017, as it's on pace to levy only a fraction of the fines it reported last year.
During the first half of 2017, Finra levied $23.4 million in fines, compared to $79.4 million a year earlier, according to a report by Washington, D.C.-based law firm Eversheds Sutherland.
In the first half of 2017, fewer fines sprang from cases involving Finra’s 2016 top enforcement issues, according to analysis by Eversheds Sutherland partner Brian L. Rubin and associate Adam C. Pollet. While anti-money laundering cases accounted for $45.9 million in fines during 2016, in the first half of 2017 Finra reported only $433,000 in fines emanating from six cases. While $30.3 million in fines came from 30 variable annuities cases in 2016, only $510,000 in fines came from six variable annuities cases during the first half of 2017. Declines were measured in other areas of emphasis including trade reporting, books and records, and unregistered securities.
Finra is likely to report an overall reduction in fines at year’s end, the agency is currently on pace to order $47 million in fines at year’s end, a 73 percent decrease from the $176 million reported at year-end 2016, according to the report. .
Nevertheless, Finra has already outpaced its 2016 numbers for total restitution ordered, according to the report. While Finra reported that just $28 million in restitution had been ordered in 2016, in the first half of 2017 it had ordered $38.1 million in restitution, on pace for more than $76 million at year’s end, but still below the record-setting $96 million it had ordered in 2015.
The agency may also be imposing more suspensions and censures in lieu of fines, particularly in cases where accused parties have self-reported infractions and/or made efforts to remediate damages in advance of an enforcement action.
Finra’s 2017 Regulatory and Examination Priorities Letter, published earlier in the year, notes that the agency would emphasize compliance, risk management and supervision in its enforcement actions this year.
Most of the fines levied by Finra in 2017 came from trade reporting cases. Finra reported 59 cases resulting in $8 million in fines, representing a steep drop from the first half of 2016, when 65 cases resulted in $12.6 million in fines, according to the report. Finra reported 147 trade reporting cases and $24.4 million in fines in 2016.
The 38 books and records cases reported by Finra during the first half of 2017 resulted in $2.2 million in fines. During the first half of 2016, 47 reported books and records cases accounted for $3.7 million in fines. For the year of 2016, Finra reported 99 books and records cases accounting for $22.5 million in fines.
In the first half of 2017, Finra reported 25 mutual fund cases for a total of $754,000 worth of fines, compared to 20 cases and $215,000 in fines during the first half of 2016, according the report. Finra reported $3.3 million in fines from 35 mutual fund cases in 2016.