08/29/2024 | Press release | Distributed by Public on 08/29/2024 12:11
"(F)inancial crimes cannot be prevented if you take the cop off the beat."
"The new reports of declining enforcement appear to indicate that FINRA has lost sight of its mission: protecting investors and promoting market integrity."
Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.) wrote to the Financial Industry Regulatory Authority (FINRA) requesting an explanation for the organization's record-low number of enforcement actions on financial crimes.
Established in 2007, FINRA is a self-regulatory, non-governmental entity responsible for ensuring securities firms and brokers operate fairly and honestly.
"The agency's mission is "to protect investors and promote market integrity," said Senator Warren, "But financial crimes cannot be prevented if you take the cop off the beat."
A June 2024 Bloomberg report revealed that enforcement actions by FINRA in 2023 "slid to the lowest level in history" and FINRA's "(t)otal fines…are down by about half since a peak in 2016." This decrease coincides with the start of FINRA360, FINRA's organization-wide transformation that began seven years ago, which, according to FINRA, was designed to make the organization as "effective and efficient" as possible. However, since the launch of FINRA360, enforcement actions have dropped each year and are now at their lowest since FINRA's inception. Additionally, the value of fines imposed by the agency is down from $173.8 million in 2016 to $88.4 million in 2023.
To make matters worse, the agency has appeared to limit transparency about its enforcement actions. For example, according to Bloomberg, publication of press releases promoting cases has often been eliminated by FINRA leaders. Last year, FINRA issued releases for "just 10 of 426 enforcement actions, compared with 63 in 2015," and details on cases are difficult to find in FINRA's database.
"The new reports of declining enforcement appear to indicate that FINRA has lost sight of its mission: protecting investors and promoting market integrity," said Senator Warren.
Senator Warren requested details of investigations opened by FINRA since 2016, agency criteria for publicizing an enforcement action, more information about the FINRA360 program, and evidence of a decline in bad actor firms and individuals by September 13, 2024.
Senator Warren has led efforts in Congress to protect investors and enhance transparency at FINRA:
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