FINRA Expected to Bring Record Breaking Enforcement Cases in 2012

The Financial Industry Regulatory Authority (FINRA) is on pace to bring a record breaking number of enforcement cases this year compared to 2011.  Last year, FINRA brought approximately 1,500 cases in which 33% of large firms were faced with an enforcement action while less than 5% of smaller firms faced an action.  According to AdvisorOne, Sutherland Asbill & Brennan’s annual FINRA Sanctions Survey, released in early March, found that fines issued by FINRA increased significantly in 2011, jumping 51% to $68 million from fines of $48 million levied by the regulator in 2010.

The top two areas that FINRA cases have focused are dishonesty and unapproved outside businesses, particularly focusing on complex products.  During FINRA’s annual conference, Chairman and CEO of FINRA, Richard Ketchum, explained that a number of FINRA enforcement actions involve complex products where “firms didn’t adequately supervise the sale of the products, then recommended products that were unsuitable for the investors, or the sales material were misleading.”


Author: Dexter Johnson

The author is a an attorney who for the past 14 years has concentrated his practice in representing, successfully, investment advisers, broker-dealers, corporations and individuals who are subject to SEC, FINRA, State or other regulations and who may be the subject of regulatory examination, review or investigation. He formerly worked at the SEC. His regulatory and litigation experience has encompassed virtually every type of securities issue in the industry. He has also negotiated favorable outcomes in many of these matters for his clients.