When most people were getting ready to glug New Year’s champagne, Finra’s enforcement lawyers and some of the major broker-dealers’ counsels were hammering out ways to conclude business prior to January 1 negotiations about the agency’s enforcement actions.
As a result of the rush, starting in the middle of December, Finra announced some $31 million in fines against major broker dealers.
On Dec. 17, Finra announced UBS would be fined a total of $15 million by it and by two federal agencies for “significant deficiencies in its anti-money laundering programs (AML). Three days later, Finra announced a $6 million fine for Merrill Lynch for allegedly selling IPOs to industry insiders, and the day after Christmas, Finra unveiled a $10 million fine against Morgan Stanley for alleged supervisory failures in its AML program.
“More Finra than firms pushing year-end. Some of these cases are quite old,” says Brad Bennett, the former chief of enforcement at Finra, and a lawyer in Washington, D.C.
But it is highly probable that the firms also sought to put potential liabilities behind them before 2019 began.
“We are pleased to have resolved this matter from several years ago. We continuously work to strengthen our controls and have been recognized by Finra for the extraordinary steps we have taken to expand and enhance our AML program,” a Morgan Stanley spokesperson said the day the firm’s fine was announced.
Finra cited the firm’s alleged supervisory failures that occurred over a five-year period. The firm allegedly didn’t dedicate enough resources to review alerts put out by an automated system, Finra reported. The company consented to the entry of Finra’s findings without admitting or denying the charges. Finra’s focus and findings were apparently largely surrounding legacy Smith Barney systems, staffing and processes.
Alleged AML failures were also the source of UBS’s fines. Finra fined UBS Financial Services $4.5 million and UBS Securities $500,000 for failing to establish and implement anti-money laundering programs reasonably designed to monitor certain high-risk transactions in customer accounts.
The SEC and the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury, also announced on Dec. 17 that UBS Financial Services paid a $5 million penalty to each of these agencies in separate actions for AML violations.
"The firm is pleased to have resolved this matter, which addressed certain legacy anti-money laundering program deficiencies," a company spokesperson said in a statement. "UBS remains fully committed to assisting the government in combating money laundering and other illicit activity."
At Merrill, the issue was selling shares to insiders. As part of the settlement, Merrill Lynch neither admitted or denied the charges.
A Merrill Lynch spokesman told reporters: "We have enhanced our policies and procedures to properly identify clients who are ineligible to receive IPO shares and to prevent similar conduct in the future.”