After FINRA’s 2014 Enforcement Overhaul, Are Bigger Fines Coming?

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After FINRA’s 2014 Enforcement Overhaul, Are Bigger Fines Coming?

FINRA doubled its enforcement haul in 2014 by collecting about $134 million in sanctions, leading attorneys to wonder if the trend will lead to bigger fines in the future. During the past year, the regulatory authority hit big names, including Citigroup Inc., Morgan Stanley Smith Barney LLC, and Bank of America’s Merrill Lynch unit, with multimillion-dollar fines pertaining to claims that they failed to adhere to FINRA’s rules. The indiscretions ranged from banking conflicts of interest to sales practice issues involving retail and small business customers.

According to a study by Sutherland Asbill & Brennan LLP, FINRA accrued its largest total of fines since the financial crisis with twenty-five cases collectively earning over $100 million in fines. Sutherland also calculated that the roughly $135 million was more than double the $60 million in fines it imposed on 2013. The total was also much larger than the fines ranging from $28 million to $72 million between 2008 and 2012.

FINRA’s biggest fine of 2014 was a $15 million penalty against Citigroup in November. FINRA claimed that Citigroup had been engaging in violations that lasted more than nine years, involving its failure to properly supervise its research analysts. An $8 million penalty against Brown Brothers Harriman in February was second. That case involved anti-money laundering rule violations over the firm’s failure to detect and investigate suspicious penny stock transactions. Both firms settled their cases without admitting or denying wrongdoing.

Some believe that FINRA’s 2014 is a sign of things to come. Jeff Kern, special counsel at Sheppard Mullin Richter & Hampton LLP and a former FINRA enforcement attorney, said, “I think this is the new normal. I don’t think FINRA has any intention of resting on its accomplishments or to view this as an anomaly.”

Others, however, believe that 2014 was an anomaly in that a number of high price tag cases came to fruition simultaneously. Emily Gordy, an attorney with Shulman Rogers Gandal Pordy & Ecker PC and a former senior vice president of FINRA enforcement, said, “It was definitely an alignment of the stars.”

Regardless, looking ahead to the future, attorneys believe FINRA will follow through on its promise to pay close attention to issues around the treatment of seniors, retirees and those who have suddenly come into wealth, such as through an inheritance.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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