Sen. Warren calls out FINRA for lame enforcement of financial crimes

U.S. Sen. Elizabeth Warren (D-MA) wants to know why the Financial Industry Regulatory Authority (FINRA) is experiencing a record-low number of enforcement actions on financial crimes.

“The agency’s mission is to protect investors and promote market integrity,” Warren said, “but financial crimes cannot be prevented if you take the cop off the beat.”

Enforcement actions by the non-governmental FINRA, established in 2007 to ensure securities firms and brokers operate fairly and honestly, slid to the lowest level in history during 2023, and its total fines are down by about half since a peak in 2016, according to an Aug. 28 letter Warren sent to FINRA President and CEO Robert Cook.

The senator cited a June 28 news article published by Bloomberg that reported FINRA’s caseload has plummeted over two-fold since its peak in 2015.

“There were 426 enforcement actions in 2023, the lowest since FINRA’s inception in 2007,” Warren wrote. “Similarly, the value of fines imposed by FINRA for brokers or dealers that break the rules has declined from $173.8 million in 2016 to $88.4 million in 2023.”

To make matters worse, she wrote, the agency has appeared to limit transparency about its enforcement actions.

According to the Bloomberg article, “[i]n multiple instances in recent years, employees drafted press releases to promote cases, only for managers to spike their publication… Last year, the regulator issued press releases on just 10 of 426 enforcement actions, compared with 63 in 2015. Finding details on cases … can require digging into a cumbersome FINRA database.”

The decrease coincides with the start of FINRA360, an organization-wide transformation that began seven years ago, which, according to FINRA, was designed to make the organization as effective and efficient as possible, according to Warren’s letter.

However, since the launch of FINRA360, enforcement actions have dropped each year and are now at their lowest since FINRA’s inception, she wrote.

“The new reports of declining enforcement appear to indicate that FINRA has lost sight of its mission: protecting investors and promoting market integrity,” said Warren.

The lawmaker requested that Cook provide her with 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 Sept. 13.

The post Sen. Warren calls out FINRA for lame enforcement of financial crimes appeared first on Financial Regulation News .