Fines and restitutions ordered by the Financial Industry Regulatory Authority in 2021 were boosted significantly by just one settlement that the industry’s self-regulator reached with zero-commission brokerage Robinhood Financial, according to a recent report.
In all, Finra reported $91 million in fines for all of 2021, a 60% increase from 2020 and the highest total since 2016, Eversheds Sutherland partners Brian Rubin and Adam Pollet found in a review of the industry self-regulator’s monthly disciplinary reports, press releases and online database. Finra has yet to publish its annual report or update its “Statistics” web page, the authors note.
Well over half of the total fines ordered in 2021 — $57 million, to be exact — came from just one “record-setting” fine Finra ordered a “FinTech firm” to pay in June over allegedly negligent communications related to margin issues, failures in due diligence in approving options trading privileges for customers and outages and critical system failures, among other issues, according to Rubin and Pollet, who don’t identify Robinhood by name.
In June, the self-regulator ordered Robinhood to pay the record-setting fine over failures related to the issues identified by Rubin and Pollet, as reported.
Without the Robinhood fine, Finra’s total 2021 fines would have been 40% lower than in 2020, according to the report.
In the settlement with Robinhood, Finra also ordered the firm to pay $12.6 million in restitution. That bumped up total restitution for 2021 to around $49 million, which was 96% higher than in 2020, Rubin and Pollet write.
The number of total cases reported by Finra, meanwhile, dropped from 602 in 2020 to 569 in 2021, according to the report.
“Looking beyond the record-setting case, Finra continued its nearly decade-long focus on anti-money laundering in 2021, while also pursuing more ‘nuts and bolts’ issues like suitability and trade reporting,” Rubin wrote in the report.
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