Regulators on a tear! In less than 30 days, FINRA issues nearly $3.5 million in fines

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November 30, 2016
2016 was a very good year for SEC whistleblowers – $130 million and still counting!
December 14, 2016

While you were eating turkey, watching football, and gearing up for your fiscal year-end…FINRA has been very, very busy.

Despite office closures to celebrate Veterans Day, Thanksgiving, and a host of other state and local holidays, FINRA has been actively putting nearly $3.5 million worth of lumps of coal into the holiday stockings of 93 members. Are you next?

Okay…it wasn’t really coal.

It was nearly $3.5 million in fines, sanctions, and disgorgements for violations in a host of easy to address areas — like written supervisory procedures, or inappropriate marketing communications.

Come on people. With the cost of compliance so, dare we say it, affordable, and the cost of regulatory fines so costly, why are you dithering about when it comes to compliance?

Divide $3.5 million by 93 and the average $$$ damage to each offender’s bottom line is approximately $38K. But in reality, many smaller firms incurred smaller fines (anywhere between $5,000-$30,000) along with other disciplinary actions like censures, sanctions, and suspensions. The somewhat larger, or just more egregious were forced to cough up six figures in addition to stiffer censures, sanctions, and suspension.

Hmmm..Do I pay $350K or buy compliance software? Hmmm…

How much do you think it would have cost Avila Capital Markets, Inc. of New York City to implement appropriate policies, systems, and procedures with an eye to avoiding a $350,000 FINRA fine? Or to put the systems in place to pre-empt a FINRA demand (and attendant costs) to hire an independent consultant the Authority deemed acceptable? Under $350K for sure!

Same could be said about the second place winner in FINRA’s Coal Compliance Sweepstakes, United Planners’ Financial Services of America, which was also censured and fined $225,000 for failing to establish an adequate supervisory system for the use of consolidated reports prepared by its RIAs.

Why would anyone want to run the risk?

Especially when compliance solutions can be so easy-to-use, and inexpensive. Trustmont Financial Group, Inc. of Greensburg, PA, probably felt pretty pennywise before FINRA censured and fined the firm $100,000 for failing to retain emails of representatives who sent and received business communications and related materials via third-party email accounts not provided to them by the firm. In this instance, FINRA found that the firm knew the representatives used outside email addresses, but failed to take any steps to preserve those emails. Nor did Trustmont register 15 locations as branch offices, inspect 29 of its official branches at least once every three years, or establish written supervisory procedures for the inspection of its non-branch offices.

Faulty policies + procedures =fine$

FINRA’s November 2016 Report reveals other shortfalls by dozens and dozens of other firms. This is why, noted Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement, it’s critical that firms have effective systems in place to comply with their obligations.

So what will be in your firm’s stocking this holiday season?

We already know what FINRA’s got planned, and you can be pretty certain that the other members of the regulatory alphabet are not far behind, with their lists of who’s been “naughty or nice.” On which list Is your firm? Or your management? Supervisors? Compliance professionals?

How’s that working for you? Sleeping at night?

Stuff happens. It just does. But when it does, make sure you have the tools to ensure regulatory compliance, reduce your firm’s exposure, and avoid related financial consequences. You do have options.

Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions, compliant data capture + storage, and compliant recordkeeping specifically designed for the financial services community.

Let’s talk.

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