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The Financial Industry Regulatory Authority (FINRA), the major non-governmental regulator for all securities firms having operations in the U.S., levied $68.0 million in fines on the brokerage houses for the year ended 2012, marginally down from $71.9 million imposed in 2011. Concurrently, they have been ordered to repay $34 million to the aggrieved customers.
Notably, FINRA's fine impositions on the brokerage firms significantly increased from $42.5 million levied in 2010. Moreover, a mere $6 million was ordered for repayment to investors in that year. Such an escalation stemmed from an increase in the overall enforcement activity of FINRA.
Fines imposed inculcate high-profile enforcement cases against huge brokerages along with small brokerage owners. FINRA’s continuous vigilance on fraudulent activities in the securities market led to such penalties. To ensure market veracity, the regulator implemented certain cross-market scrutiny and discovered electronic manipulative trading. Therefore, financial markets have been made more transparent to safeguard investors.
During the course of 2012, FINRA has been profoundly working on detecting potential conflicts of interest and complex products, including various types of exchange-traded funds. This scrutiny resulted in the revelation of various cases against major Wall Street brokerage houses including Morgan Stanley (MS - Analyst Report), Merrill Lynch and units of UBS AG (UBS - Analyst Report) and Wells Fargo & Company (WFC - Analyst Report).
Overall, firms in the U.S. are actively responding to legal and regulatory pressures, displaying competence to encounter impending challenges. However, the potency of the sector is not expected to return to its pre-recession peak anytime soon. Economic intricacies, both domestic and overseas, may result in some more disappointments in the upcoming quarters.
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