In attempt to combat the continuing problem of financial abuse involving elderly investors, the independent regulatory enforcement agency for the financial industry greatly increased the amount of fines levied last year.
The Financial Industry Regulatory Authority (FINRA) imposed fines of about $135 million against “bad actors” in 2014, according to an annual review published earlier this month by Sutherland Asbill & Brennan LLP.
That number was significantly driven by fines in cases concerning claims of elder financial abuse and exploitation of senior citizens, researchers found.
The $135 million collected in 2014 is more than double the $60 million FINRA collected in 2013, despite fielding fewer cases. At least $26 million of the fines collected involved cases where brokers and other investment agents were accused of exploiting elderly investors. The number of actual overall cases dropped 9% from 2013 to 2014, from 1,535 to 1,397 disciplinary actions.
“FINRA releases, priority letters, and speeches often emphasize that protecting seniors and retirees is a key focus for the regulator, but these types of cases typically did not result in significant fines. This changed dramatically in 2014,” the review notes. “Cases involving allegations about seniors and retirees resulted in $8 million in fines in 2014, an increase of 3,656% from the $213,000 in fines imposed in similar cases in 2013. Similarly, restitution in these cases increased substantially from $1.7 million in 2013 to $26 million in 2014, an increase of 1,429%.”
The group reported that fines in individual cases were much larger across the board. The review found that FINRA issued 25 fines that were in excess of $1 million, including 10 cases that resulted in fines of at least $5 million. These large fine decisions accounted for about $100 million of the fines assessed last year.
FINRA is a non-governmental agency that acts as a self-regulatory agency for investment firms. It was created in July 2007, as a successor to the National Association of Securities Dealers, handling all disputes between investors and stockbrokers or other financial firms. FINRA arbitrators resolve stock broker fraud claims that can include charges of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unauthorized trading and other claims that investments were improperly handled.