FINRAs Fines Down, Restitution Ordered Up
January 8, 2013
The Financial Industry Regulatory Authority said it brough1,541 disciplinary actions against registered brokers and firms in 2012, levying fines totaling in excess of $68 million.
That is down 5.4 percent from the $71.9 million worth of fines levied in 2011. But FINRA last year ordered restitution of $34 million to harmed investors, up 75.3 percent from the $19.4 million ordered in 2011.
FINRA also expelled 30 firms from the securities industry, barred 294 individuals and suspended 549 brokers from associating with regulated firms.
Among the disciplinary actions were a series of actions taken for the manner in which exchange-traded funds were sold. FINRA sanctioned Citigroup Global Markets; Morgan Stanley & Co; UBS Financial Services; and Wells Fargo Advisors approximately $9.1 million for selling leveraged and inverse ETFs “without reasonable supervision and for not having a reasonable basis for recommending the securities.” Fines totaled more than $7.3 million and restitution to customers reached $1.8 FINRA brought similar cases against Merrill Lynch and Scott & Strongfellow.
Merrill Lynch also was fined $450,000 for supervisory failures for failing to flag improper sales of structured products to retail customers.
to the sales of structured products to retail customers. The firm relied upon automated exception-based reporting systems to flag transactions and/or accounts that met certain pre-defined criteria, but did not specifically monitor for potentially unsuitable concentration levels.
Deutsche Bank Securities was censured and fined $1.25 million for “substantially overstating its advertised trade volume” to three private service providers. FINRA also censured and fined Jeffries & Company, Inc., $550,000 in a similar case
FINRA expelled Biremis Corp., a Canadian firm that handled U.S. trading for an international trading company, and barred its chief executive for the use of a manipulative electronic trading scheme that “layered” orders for particular stocks, to move prices.
Such cases, FINRA chief executive Richard Ketchum said in a statement about the 2012 actions, showed the regulator now had, for the first time, cross-market surveillance programs “that more effectively detected electronic manipulative trading.’’
In an interview with the Wall Street Journal Tuesday, Ketchum indicated FINRA will be looking more closely at electronic activity in dark pools, to see if traders are trying to move prices to their advantage, as well as other high-speed trading practices.