A record year of FINRA enforcement activity heralds heightened scrutiny on a bevy of issues including cybersecurity, anti-money laundering policies and protection for senior clients, legal and regulatory experts caution.
Analyzing the regulator’s 2016 enforcement actions, New York law firm Eversheds Sutherland found that while the total number of cases the industry regulator brought last year dipped slightly from 2015, the monetary fines it assessed nearly doubled to $176 million.
That figure was far and away a record for FINRA penalties, and amounted to a 529% increase since 2008, according to Eversheds Sutherland’s analysis.
A main driver of the ballooning fines has been FINRA’s increasing tendency to levy what Eversheds Sutherland calls “super-sized” penalties of $1 million or more — in some cases, much more, such as the $20 million fine the regulator levied against MetLife Securities last May in a case involving variable annuities.
It is possible that 2016 will stand as a high-water mark for fines, but observers caution the industry that FINRA will very much remain a cop on the beat.
“We have no signs that the pace at FINRA will be slowing down,” says Adam Pollet, an attorney with Eversheds Sutherland who represents brokers and advisers in regulatory matters. “It likely won’t reach the record high of 2016, but we can still have a lot of disciplinary actions expected in 2017.”
Pollet speculates that FINRA could take an even more aggressive stance “given the possible enforcement void at the SEC under the new administration,” which has made deregulation a centerpiece of its domestic agenda.
Source: Financial Planning