FINRA says broker fines jumped 53 percent
NEW YORK |
NEW YORK (Reuters) - The Financial Industry Regulatory Authority has levied more than $63 million in fines in 2011, a 53 percent increase over last year as the Wall Street watchdog pursued more cases and landed a few big fines.
Year-end statistics released by FINRA on Friday showed an increase in enforcement activity this year, which commenced with the hiring of Bradley Bennett, a former Washington-based defense lawyer, as its enforcement chief.
FINRA has long played down fines as a measure of its effectiveness as a regulator, noting its job includes policing more than 635,000 individual brokers.
This year's report comes as it tries to convince lawmakers that it can supervise investment advisers, a group that reports to the SEC, under new Dodd-Frank regulations.
"I hate numbers, from an enforcement standpoint, but having said that, they're all up this year," FINRA Chief Executive Richard Ketchum told reporters at a briefing Friday.
With half a month still remaining, FINRA said this year it filed 1,411 disciplinary actions against brokers and firms, up nearly 8 percent from 2010. The watchdog also ordered about $19 million in restitution be paid to harmed investors, more than three times the $6 million ordered last year.
(To see a graphic of FINRA enforcement and fines since 2005, click on link.reuters.com/huj65s)
Fines collected by FINRA, to be sure, got a big bump from one case -- a $12 million fine levied against UBS in October -- which alone made up more than half the increase in fines from last year.
The jump in cases also reflects changes to FINRA's broker examinations, including more electronic information reviews to free up time for examiners to conduct on-site reviews of branch offices.
FINRA hired Bennett in January to replace Susan Merrill, who along with FINRA came under fire for a slowdown in enforcement during her tenure, which ended in March 2010 and included the 2007 credit crunch and the 2008 financial crisis.
Investors lost trillions of dollars in wealth, and the public questioned why regulators like the SEC and FINRA did not stop the biggest transgressions.
Some lawyers say that FINRA's focus on increasing enforcement numbers can lead to pursuing too many insignificant cases.
"It's about more numbers and less about important cases," said George Brunelle, a New York securities lawyer who defends brokerages and who previously enforced the rules at the New York Stock Exchange.
The increase in fines may also reflect the usual progression of enforcement actions that stemmed from the financial crisis.
"It's not surprising that they did bring a number of big dollar cases," said Brian Rubin, a Sutherland Asbill & Brennan partner and former deputy chief counsel at the NASD, FINRA's predecessor. "The question is whether they've gone after the right parties and the right cases."
Among FINRA's larger cases this year: UBS was fined $12 million for violations involving short sales and its failure to maintain adequate supervision of certain employees.
FINRA also ordered fines of $2.5 million and restitution of $8.25 million over UBS' 2008 sales of "principal protected" notes issues by Lehman Brothers, just before the investment bank collapsed into bankruptcy.
On Thursday, FINRA fined Wells Fargo & Co's Wells Fargo Advisors $2 million for unsuitable sales of "reverse convertible" securities to elderly customers.
FINRA is a private-sector company that is empowered by the SEC to supervise and regulate nearly 4,500 U.S. broker-dealers, from Morgan Stanley to the smallest one-man shops.
(Reporting by Suzanne Barlyn and Joe Giannone in New York; Editing by Jennifer Merritt and Walden Siew)
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