The major financial self-regulatory organization (SRO) in the U.S. handed down almost US$40 million in fines last year. The SRO also spent more than US$70 million on initiatives funded by its enforcement activity.
The Financial Industry Regulatory Authority Inc. (FINRA) noted in a report detailing its use of fines collected in its enforcement activity that its highest priority when addressing misconduct is returning money to harmed investors.
FINRA also imposes fines on violators to discourage future misconduct, and devotes money collected to specified uses, including capital spending to improve SRO oversight or address new requirements, providing training to FINRA employees, and to build up its reserves.
In 2019, FINRA issued US$39.5 million in fines, but it spent US$71.1 million on eligible initiatives.
Due to the excess of spending over enforcement revenue, FINRA funded the additional US$31.6 million from its reserves.
The biggest share of that spending, US$56.6 million, came in “strategic expenditures that promote more effective and efficient regulatory oversight,” FINRA stated in the report.
This spending included US$18.7 million on modernizing certain systems that FINRA operates; US$10.5 million on migrating certain data centres to cloud-based platforms; US$17 million to enhance market surveillance systems; and US$8.2 million to improve its registration, testing and continuing education systems.
The SRO also spent US$3.4 million on various investor education programs; US$6.7 million to fund industry compliance resources; and, US$4.4 million on training, including training programs for its dealer supervision, enforcement and market regulation staff.