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Fines to FINRA firms soar in 2012

Posted on 28 Mar 2013

Fines to FINRA regulated firms have soared 15% in 2012, with the bulk of attention paid to violations of suitability rules related to investment products. This information was contained in an annual report by Sutherland Asbill & Brennan, a US based law firm.

The report found that FINRA increased the number of cases it brought for a fourth year in a row, with actions up 3.6% from 2011. While the increase in number of cases was small, the aggregate amount of fines grew from $68 million in 2011 to $78.2 million in 2012, an increase of almost 15%.

FINRA will continue to look at suitability standards, particularly as the complexity of products continues to evolve and more and more retirees in the US look to make up for lack of yield from savings accounts with yield from investment products. One of the cases cited in the report involved sale of non-traded real estate investment trusts (REITs), unit investment trusts (UITs) and collateralized mortgage obligations (CMOs), to elderly investors.

While all US registered funds are required to have policies and procedures in place to ensure that each investor is provided with investment products suitable to their specific investing needs, background, and experience, compliance training and monitoringneeds to be in place to ensure active management of these policies. This is particularly important in view of the increased complexity of products and the distribution extending beyond traditional institutional investors.