An annual review of disciplinary actions brought by the Financial Industry Regulatory Authority (FINRA) in 2009 conducted by the law firm Sutherland Asbill & Brennan LLP found that FINRA reported modest increases in fines and disciplinary actions in 2009, as compared to 2008, but was less active than in 2005, 2006 and 2007. Sutherland also identified the top enforcement issues for FINRA in 2009, as well as disciplinary trends.
Fines and Disciplinary Actions
FINRA fined firms and individuals approximately $50 million in 2009, almost twice as much as in 2008 (approximately $28 million). While that increase is noteworthy, FINRA’s fines in 2009 were still significantly smaller than the fines obtained by FINRA and its predecessors (NASD and the New York Stock Exchange) in 2005, 2006, and 2007 ($184 million, $111 million, and $77 million, respectively). In addition, FINRA resolved more disciplinary actions in 2009 (1,090) than in 2008 (1,007), but fewer than were resolved in prior years (1,344 in 2005; 1,147 in 2006; and 1,107 in 2007).
Top Enforcement Issues
1. Mutual Funds, which generated the most total fines in 2008, once again produced the highest aggregate fines (approximately $12 million), narrowly edging out Suitability. Mutual fund cases accounted for nearly one-fourth of FINRA’s total fines in 2009. More than one-half of the mutual fund cases (representing approximately $6.6 million in fines) also included suitability allegations (e.g., share class cases, discussed below). FINRA also levied significant fines in cases involving mutual fund specific issues, e.g., $2.1 million in fines levied against 25 firms for failing to comply with NASD’s breakpoint self-assessment. It should also be noted that the $12 million in mutual fund fines, while significant, represents a small fraction of the fines in mutual fund cases in 2005 and 2006 ($104 million and $95 million, respectively).
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