The analysis of the Financial Industry Regulatory Authority (FINRA) was conducted by Sutherland Asbill & Brennan LLP, and involved a review of FINRA disciplinary notices, press releases and major news articles. According to their investigation, FINRA handed out approximately $135 million worth of fines in 2014, more than double the $60 million in fines from 2013, and more than quadruple the $28 million in fines from 2008.
Last year was also a banner year for restitution, with FINRA ordering respondents to pay more than $50 million, well above the $10 million in restitution from 2013.
Perhaps most startling, though, is that the number of disciplinary actions in total dropped by nine percent from 2013 to 2014. The latter saw almost 1,400 disciplinary actions, down from 1,535 in 2013, but still up from 1,073 cases filed in 2008. And while the number of firms FINRA expelled dropped from 24 in 2013 to 18 in 2014, the number of individuals who were either suspended rose from 670 to 705 in 2014.
The decrease in number of disciplinary actions filed combined with the increase in fines overall indicates that fines and restitution in individual cases were larger on average. According to the research, in 2014, FINRA handed out 25 “supersized” fines of $1 million or more, with 10 instances of fines of $5 million or more.
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Prior to the SEC’s decision, public arbitrators with industry experience were allowed to serve on panels provided they had a cooling down period of two to five years. Critics of the arbitration panels have argued that allowing arbitrators with ties to the securities industry unfairly biases the panels in favor of brokerage firms.
FINRA arbitration is a forum for resolving disputes in the securities industry. Individual investors who have a dispute with their brokers and/or brokerage firms can file a FINRA arbitration to attempt to recover losses due to unethical or illegal activities on the part of the broker or brokerage firm.