FINRA’s Number of Disciplinary Actions Declines for Third Year in a Row

An annual report by global law firm Eversheds Sutherland has completed its study of the disciplinary actions reported by the Financial Industry Regulatory Authority in 2022 and found that the number of disciplinary actions declined for the third year in a row.

By reviewing FINRA’s monthly disciplinary reports, press releases and online database, partners Brian L. Rubin and Adam C. Pollet found that in 2022 fines and restitution decreased significantly compared with 2021, in large part because of one record-breaking fine FINRA ordered in 2021 against an online brokerage firm.

The firm found that FINRA’s fines decreased from $103 million in 2021 to $45 million in 2022, a 56% difference. However, the fines in 2021 included a single, record-setting $57 million fine against one firm. Without that one large fine, FINRA’s fines in 2021 would have been $46 million, which would have resulted in only a 2% decrease from 2021 to 2022.

In contrast, the report says the number of cases with very large fines increased in 2022. FINRA assessed 11 fines of $1 million or more, which they refer to as “supersized” fines, in 2022. In 2021, FINRA had eight such fines. In 2022, FINRA assessed two fines of $5 million or more, which they refer to as “mega” fines. In 2021, FINRA assessed one mega fine, which was the record-setting $57 million case.

In 2022, the amount of restitution ordered by FINRA also decreased substantially. FINRA ordered restitution of approximately $21 million, which was down 55% from the $47 million in restitution ordered in 2021. They claim a main driver in the decline in restitution was the reduction of “supersized” restitution orders, $1 million or more. In 2022, FINRA ordered only three supersized restitution orders, totaling approximately $17 million, while in 2021, there were ten supersized restitution orders, totaling approximately $42 million.

As a result, the total monetary sanctions ordered by FINRA (fines, restitution and disgorgement) in 2022 were $72 million. This represents a 52% decrease from the $150 million in total sanctions ordered in 2021.

FINRA also reported 463 disciplinary actions in 2022, a 13% decrease from the 534 disciplinary actions in 2021 and a 17% decrease from the 560 disciplinary actions in 2020.

Top FINRA Enforcement Issues Measured by Total Fines Assessed

1. Books and Records cases resulted in the most fines assessed by FINRA in 2022. Books and records cases last appeared on the Eversheds Sutherland Top Enforcement Issues list in 2020. FINRA reported 50 such cases in 2022, resulting in more than $14.8 million in fines.

2. Research/Analyst cases resulted in the second most fines for FINRA in 2022, making the Top Enforcement Issues list for the first time since 2017. There were three such cases in 2022, with fines totaling $9.3 million.

3. Consumer Protection Rule issues resulted in the third most fines for FINRA in 2022, although that ranking is based on one case.

4. Trade Reporting cases resulted in the fourth most fines for FINRA in 2022. This marks the third consecutive year that trade reporting cases have been on the Eversheds Sutherland Top Enforcement Issues list. FINRA reported 14 trade reporting cases in 2022, resulting in a total of $7.9 million in fines.

5. Best Execution cases resulted in the fifth most fines for FINRA in 2022, reaching the Top Enforcement Issues list for the first time since 2014. FINRA reported two such cases totaling $4 million in fines.

Eversheds Sutherland is a global multinational law practice that provides legal services to the world’s largest corporate firms. The practice was created by the February 2017 merger of Eversheds LLP and Sutherland Asbill & Brennan LLP and is one of the 50 largest law practices in the world.

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