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San Diego Securities Lawyer Update: FINRA Regulatory Fines On The Rise

By George C. Miller, Esq. of Shustak Reynolds & Partners, P.C. posted on Thursday, July 6, 2017.

George C. Miller, Esq.
619.696.9500 ex. 105
[email protected]

The Financial Industry Regulatory Industry (FINRA) is a non-profit, non-governmental organization authorized by Congress to regulate the brokerage industry. Through its more than 3,500 employees, FINRA’s stated goal is to protect investors and the integrity of the financial markets through writing and enforcing rules governing broker-dealers and their registered representatives (e.g., stock brokers); examining brokerage firms and brokers for compliance issues and other rule violations; and, in the case of an actual or potential rule violation, administering enforcement actions and discipline through its enforcement division. FINRA is funded from a variety of sources, including annual “member” fees brokerage firms must pay. In addition, FINRA often assesses significant monetary fines on broker-dealers and registered representatives who have run afoul of FINRA’s rules.

Each year, FINRA publishes a financial report detailing the regulator’s revenues and expenses for the past year. For the 2016 calendar year, FINRA recently reported a significant increase in the total dollar amount of fines assessed against brokerage firms and brokers. The number of firm examinations and enforcement actions, meanwhile, was only slightly increased as compared to prior years. In 2016, however, FINRA collected $80 million more in fines than in 2015, reflecting a nearly 60% increase in the total dollar value of fines assessed.

The large increase in fines comes at a time when FINRA’s overall operating revenues have continued to decline. With fines on the rise, and FINRA’s expectation that its operating revenues will continue a slow decline, that could spell trouble for brokerage firms and registered representatives facing a FINRA rule violation or enforcement proceeding. FINRA also signaled that its annual membership dues, which have not increased for the past five years, may soon be rising as well.    

Shustak Reynolds & Partners, P.C.’s experienced California securities and financial services lawyers are well versed in the securities and financial services industry.  We routinely represent brokerage firms, registered representatives, registered investment advisory firms (RIAs) and others employed in the securities and financial services industry in FINRA inquiries and investigations.  Contact our San Diego FINRA lawyers today for a complimentary consultation. 

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