The law firm Eversheds Sutherland LLP published its annual analysis of disciplinary actions brought by the Financial Industry Regulatory Authority, reports AdvisorHub.
The study found an increase in FINRA cases and the amount of restitution that was ordered in 2024, but a decrease in the money paid in fines. The information was compiled from the authority’s monthly disciplinary reports, press releases and online database.
According to the Eversheds Sutherland analysis, the number of cases reported by FINRA increased last year, after declining for the previous eight consecutive years. FINRA brought 552 disciplinary actions in 2024, a 22% increase from the 453 disciplinary actions in 2023.
The fines reported by FINRA in 2024 fell to $59 million from $89 million in 2023, a 35% decrease. But it was noted that the fines in 2023 included a single $24 million penalty against one firm, Bank of America Securities. Without that one large fine, 2023’s total fines would have been $65 million, or 10% more than 2024.
“Although fines were down, the amount of restitution ordered by FINRA in 2024 increased substantially,” Eversheds Sutherland partners Brian Rubin and Adam Pollet wrote. “FINRA ordered restitution of approximately $23 million, which was up 207% from the $7.5 million in restitution ordered in 2023.”
The year’s largest fines were $6 million levied on Merrill Lynch for failing to implement proper safeguards to detect and report suspicious transactions under the Bank Secrecy Act and more than $6 million in penalties against LPL Financial for supervisory failures.
The study also lists the top FINRA enforcement issues for 2024 measured by total fines assessed:
1: Trade Reporting cases resulted in the most fines for FINRA in 2024, the fifth consecutive year that trade reporting cases have been on the Eversheds Sutherland Top Enforcement Issues list. FINRA reported 21 trade reporting cases in 2024, resulting in a total of about $9 million in fines.
2: Spoofing cases ranked second on the list. Though there were only two spoofing cases in 2024, one resulted in a $6 million fine, the largest of the year. The study points out that spoofing is a type of fraudulent trading involving the use of non-bona fide orders to create a false appearance of market activity on one side of the market to induce other market participants to execute against bona fide orders entered on the opposite side of the market in the same security or a correlated product.
3: Options Trading cases appeared on the list for the first time. FINRA reported four options trading cases in 2024, resulting in a total of approximately $4.3 million in fines. In the largest options trading case, FINRA fined a firm over $2 million for failing to detect customers with cash accounts who engaged in “free-riding” in options and issued options on more than 4.2 million occasions. Free-riding is the buying and selling of securities before paying for them.
4: Technological Issue cases resulted in a total of approximately $3.5 million in fines. These cases involve a system malfunction due to technological or human error that results in failure to comply with regulatory obligations.
5: Fingerprinting of Non-Registered Persons cases. FINRA reported six cases where non-registered persons were not fingerprinted, resulting in a total of approximately $2.7 million in fines. In the largest case, FINRA fined a firm $1.25 million for failing to fingerprint and screen for statutory disqualification any of its 2,317 non-registered associated persons based in foreign locations and 1,663 US-based non-registered associated persons who were required to be fingerprinted and screened.
The study noted since the adoption of Regulation Best Interest, FINRA has brought an increasing number of Reg BI cases each year. In 2024, FINRA reported 30 Reg BI cases, double the previous year, resulting in a total of $1.6 million in fines. “We expect that this trend will continue”, said Rubin. “Regardless of whether SEC enforcement activity slows down under the second Trump administration, FINRA’s role in Reg BI examinations and enforcement actions will likely increase because it remains the primary regulator of broker-dealers.”
The attorneys at Lewitas Hyman fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. We have decades of experience representing clients with respect to examinations, investigations and enforcement proceedings initiated by the SEC, FINRA, state securities regulatory agencies and other self-regulatory organizations. If your firm is facing an investigation from a regulatory agency, please contact us at (888) 655 6002 or through our online contact form.
