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Finra Reveals Some Details on How It Determines Its Fines

May 17, 2018

Self-regulator Finra is trying to deliver on its promise to become more transparent about how it conducts its work, most recently going into some detail about how it determined the size of a fine against Fifth Third Securities, according to InvestmentNews.

"In determining the fine in this matter, Finra considered, among other factors, the firm’s recidivism, the harm to customers from the firm’s violations, the breadth and extended duration of the violations, and the firm’s failure to comply with a prior regulatory action," the industry’s self-regulator says in a footnote of the settlement cited by InvestmentNews.

Last week Finra fined Fifth Third $4 million and ordered it to pay $2 million in restitution over infractions related to the sale of variable annuities.

The footnote is the first time Emily Gordy has seen the regulator explain the amount of the fine, she tells the publication.

"When it’s in print, it takes the guesswork out of it,” Gordy, a partner at McGuireWoods and a former Finra senior vice president of enforcement, tells InvestmentNews. She adds that the new policy will hold Finra accountable, according to the publication.

Brian Rubin, a partner at Eversheds Sutherland and a former deputy chief counsel of Finra enforcement, tells InvestmentNews the explanation of the fine in the Fifth Third settlement goes hand in hand with the regulator’s stated goal of becoming more transparent. Susan Schroeder, Finra’s executive vice president for enforcement, said in a speech that the regulator would offer more details on aggravating and mitigating factors that contribute to how it determines fines, according to the publication.


On the other hand, Finra’s footnote merely “states the obvious factors” and doesn’t explain the “calculus” used to arrive at the fine, Daniel Nathan, a partner at Orrick and a former Finra vice president for regional enforcement, tells InvestmentNews.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.