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FINRA Is Doing A Whole Lot Less FINRAing These Days

The fines are down 70 percent, but the fun is way way up.
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Vera Kratochvil,

Vera Kratochvil,

When Donald Trump took office, the expectation was that the new gang in DC would summarily undo eight years of screw-tightening by the Obama administration's financial regulators. Dodd-Frank would be dismantled, the fiduciary rule consigned to the dustbin of history, and the bugles of deregulation sounded far and wide.

The shift hasn't exactly been seismic. Dodd-Frank remains just as repealed-and-replaced as Obamacare. The fiduciary rule, delayed as it may be, is still on the agenda. And people are getting miffed. On Tuesday the WSJ editorial board wrote that the Trump administration was “acting like Obama-as-usual” on too-big-to-fail. Where's the action?

Perhaps we shouldn't look at the regulators, but the self-regulators:

FINRA’s year-end overall fines look to be on a significant plunge downward...During the first half of 2017, FINRA reported $23.5 million in fines compared with $79.4 million during the first half of 2016, a drop of more than 70%, Eversheds Sutherland found. If the SRO continues at this pace, fines would total approximately $47 million — a 73% drop from the total $176 million in fines reported in 2016, and the lowest total since 2010, when FINRA ordered $42 million in fines.

Though there hasn't been any sort of official announcement on a shift in policy, Wall Street's self-regulator seems to be doing a whole lot less self-regulating in the Trump era. In nearly every category of wrongdoing, fines and investigations are down from 2016, according to a data dive from Eversheds Sutherland. Here's Brian Rubin, head of Sutherland's DC litigation group:

FINRA’s year-end overall fines look to be on a significant plunge downward, the study notes, with Rubin suggesting that may "be for a variety of reasons, such as [FINRA is] bringing different types of cases or they have heard the industry’s criticisms and they are trying to be 'kinder and gentler' regulator."

In one sense these numbers aren't too surprising. FINRA has always been the lax dad of the regulatory family, willing to keep up an appearance of sternness when the rest of the parental unit is around but otherwise content to let the kids crack open the liquor cabinet and sell high-load variable annuities to unsuspecting 98 year-olds, so long as no one does anything truly extreme. Still, it's pretty surprising just how quickly FINRA let its guard down. You have to wonder if there was some sort of stand-down-soldier memo that circulated on the morning of January 20.

But that's just one regulator, and a semi-private one at that. It's not like the rest of Wall Street's watchdogs are looking to follow in FINRA's footsteps or anything.

FINRA Fines Down 70% in First Half of 2017 [ThinkAdvisor]


Finra Still Getting The Hang Of This Whole Exam Grading Thing

Just kidding about those 200+ failure notices.