The Financial Industry Regulatory
Authority, a Wall Street watchdog overseen by the Securities and Exchange
Commission, is considering tougher penalties for misconduct after criticism
from an SEC official that its sanctions are too lenient.
In the five years since the financial
crisis, Finra, which is funded by the industry, didn't discipline any Wall
Street executives. It imposed fines of $1 million or more 55 times through
2013, compared with 259 times for the SEC, according to a Wall Street Journal
analysis. The SEC oversees a wider number of firms and range of conduct.
Susan Axelrod, Finra's
executive vice president of regulatory operations, said in an interview the
watchdog would review its guidelines to make sure penalties are
"meaningful and will have an impact."
rejected any suggestion its punishments have been insufficient, adding that
Finra, as "the cop on the beat from Wall Street to Main Street,"
should not be judged just on its biggest fines. "We're going to bring the
action against the individual broker in Des Moines, Iowa, that other regulators
are not going to bring. That's a key part of our mission."
Finra announced its review this
week after seeing the Journal analysis, which included a study of cases
obtained through open-records requests and available through public filings.
move also followed a speech last month by Kara Stein, one of five commissioners
who run the SEC, in which she told Finra employees that she was concerned
Finra's enforcement actions were "too often financially insignificant for
would encourage you to examine your sanctions and update them," she said.
Ms. Stein didn't respond to a request for comment, and a spokeswoman for the
SEC declined to comment.
Financial regulators across the board have been criticized by
lawmakers following the financial crisis for not doing enough to hold the
people running Wall Street firms accountable for perceived wrongdoing. The SEC
itself has come under scrutiny, leading to Chairman Mary Jo White vowing to get tougher on enforcement.
regulates more than 4,100 brokerage firms and 600,000-plus individual brokers.
The SEC, the top U.S. securities regulator, has about five times as many
SEC's fines against financial firms in that five-year period reached as high as
$300 million, whereas Finra's highest was $12 million, the analysis shows. The
$74.5 million in penalties imposed by Finra on brokerage firms and brokers last
year was 2% of the SEC's $3.4 billion tally for its financial year, according
to the analysis.
uses fines for capital expenditures, a spokeswoman said, while SEC fines
generally go to the government's coffers. The total sanctions for both
regulators also include restitution paid to harmed investors.
said Finra's penalties are out of whack with the industry it regulates. The
fines are "so small compared to the kind of behavior they're trying to
discourage that you scratch your head and say, 'Really?'" said Philip
Aidikoff, a Beverley Hills, Calif., lawyer who represents investors in
arbitration claims against brokerage firms.
review of its sanctions, Finra will look particularly at repeat offenders and
at the biggest firms. "We want to move the ball forward in terms of really
bad actors," said Ms. Axelrod.
"These sanctions can't be the cost of
doing business; they have to send the right message to the industry," she
for the full article in the Wall Street Journal.