Whenever a person or entity in Pennsylvania violates federal security laws, regulations and rules, they are subject to fines enforced by FINRA. FINRA enforcements also apply to the violators of the Municipal Securities Rulemaking Board.
What FINRA does
FINRA, the Financial Industry Regulatory Authority, is an advocate appointed by Congress to look out for the interest of investors. The agency ensures that the broker-dealer industry conducts itself honestly and fairly. FINRA analyzes billions of market events daily, overseeing hundreds of thousands of brokers across America.
- FINRA is a proponent for ensuring that every investor is protected.
- It certifies that any entity selling a securities product is vetted.
- It investigates claims of misleading advertisement or promise.
- It ensures sold products are suitable to investors.
- It enforces guidelines for complete disclosure of products before purchase.
2021 saw hard hits from FINRA
Between 2020 and 2021, FINRA fines saw a 60% increase, going from $57 to $91 million. New reports attribute the difference to a single $57 million fine against investment app Robinhood.
Without that specific fine, FINRA has a 40% decline in 2021 as compared to 2020. The fine represents FINRA’s highest fine total since 2016. That’s when the agency put $174 million in fines on the table.
FINRA hits top stock trade and investor app
In 2021, FINRA fined Robinhood Financial LLC $57 million along with $12.6 million in restitution, plus interest, to customers. The funds are reparations for systemic supervisory failures that caused significant harm.
When determining the monetary action, FINRA looked at the widespread damage suffered by Robinhood’s customers, including millions who got misleading or false information from Robinhood, millions impacted by system outages in March 2020 and thousands who used Robinhood counsel to approve trade options when it was not safe to do so.
Beyond the monetary fines
FINRA has guidelines that go beyond the monetary. Not complying with FINRA comes with potential suspension of operations and reputational harm and the possibility of investor litigation. The agency also has the power to bar individuals and expel firms from the market.
FINRA has a powerful reach for sanctioning malfeasance. All legal, risk and compliance teams need to stress reducing contact with FINRA and other sanctioning bodies. The guidelines do ensure accountability, predictability, consistency and a strong sense of fairness.