Despite FINRA’s Increased Fines in 2023, the Number of FINRA’s Disciplinary Actions Continued Their Downward Trend

In March 2024, Evershed Sutherland (US) LLP released its annual report (the Report) detailing disciplinary and enforcement actions initiated by the Financial Industry Regulatory Authority (“FINRA”) during the 2023 year. The Report outlines how FINRA seemingly stepped up its investigatory efforts in 2023, levying $89 million in fines against member firms and associated persons. Comparatively, FINRA reported just $54.5 million in fines during 2022, representing an increase of over 60%. Over a quarter of the fines handed out by FINRA last year can be attributed to the $24 million fine received by Bank of America Securities, Inc. for engaging in “spoofing” and related supervisory failures.

Despite FINRA’s bolstered fine revenue in 2023, FINRA ordered member firms to pay far less restitution to investors compared to past years. In 2023, FINRA ordered just $7 million in restitution compared to $21 million ordered in 2022, representing a 66% decrease. On December 6, 2023, FINRA announced sanctions against four firms, including M1 Finance LLC, Open to the Public Investing, Inc., SoFi Securities LLC, and SogoTrade, Inc., totaling over $2.6 million, which included $1 million in restitution paid to retail customers. Notably, this was the only million-dollar restitution ordered by FINRA in 2023, a stark decline from 2021 when FINRA handed out ten of such orders. If you are a financial professional who received an 8210 Request from FINRA, you should consult an experienced Securities Industry Regulatory Defense law firm, like Malecki Law in New York, to help navigate you through the process.

FINRA’s increased fine totals in 2023 were surprisingly achieved through comparatively fewer disciplinary actions. 2021 currently represents the high-water mark of FINRA disciplinary actions in recent years, totaling 569 actions. In 2023, FINRA initiated just 453 enforcement and disciplinary actions. This was the fewest number of disciplinary actions initiated by FINRA in the preceding decade and a stark contrast to FINRA’s disciplinary efforts between 2014 and 2017 when FINRA brought over one thousand disciplinary actions annually. The considerable drop-off in FINRA disciplinary actions since 2017 seems to coincide with Robert Cook taking over as FINRA’s President and Chief Executive Officer. Cook joined FINRA in August 2016 with a primary goal of taking “a fresh look at” FINRA’s enforcement program. If you are a stockbroker or financial advisor who is concerned with the language on your Form U5, you should consult a knowledgeable FINRA Expungement Attorney, like the attorneys at Malecki Law, to determine whether you can bring an action to have the concerning language removed from your Central Registration Depository (CRD).

Along with enforcement statistics, the Report also details the sales practice issues that generated the most fines for FINRA during 2023. In 2023, FINRA generated the most fine revenue from “spoofing” cases, primarily from FINRA’s enforcement action against Bank of America. The top five issues also included trade reporting violations, anti-money laundering/Bank Secrecy Act violations, Regulation Best Interest, and suitability. Notably, Regulation Best Interest violations were included on the Report’s Top Enforcement Issues list for the first time since its institution in June 2020.

In 2024, FINRA has wasted little time in carrying out its disciplinary and enforcement priorities. In January 2024, TD Private Client Wealth, LLC submitted a Letter of Acceptance, Waiver, and Consent (AWC) to FINRA and paid $600,000 in fines related to its failure to implement a compliant supervisory system and monitor the email communications of its associated personnel. In February 2024, FINRA issued an AWC to Interactive Brokers, LLC and fined the firm $3.5 million for deficient customer execution quality. In March 2024, FINRA issued an AWC to UBS Securities, LLC and fined the firm $3.75 million for reporting violations. If the first quarter of 2024 is any indication, FINRA seems intent on keeping its disciplinary and enforcement mandates at the forefront. If you are a financial professional who has recently been contracted by a regulator, like the SEC or FINRA, you should discuss your situation with a skilled FINRA Defense Lawyer, like the lawyers at Malecki Law in NYC, to chart the best path forward.

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