The regulator might be on track for a record-breaking year of fines, even improving on last year's record volumes.

FINRA's disciplinary activities for the first half of 2016 were draconian. Brian Ruben of the US law firm of Sutherland undertakes biannual reviews of its fines and restitution to see where its policies may be taking it. His figures, published at sutherland.com, are revealing.

During the first six months of the year, according to the lawyer, FINRA levied about $79 million in fines. If projected out to the end of the year, it would represent a 69% increase on last year. To put that in perspective, the SMP 500 rose by about 5% from January to June, so if FINRA could create an exchange-traded fund (ETF) based on its fines, it would have a very successful product.

Restitution

Better an ETF for fines than an ETF for restitution, however. Over the same period FINRA reported nearly $14 million which, if projected out to the end of the year, would represent a 71% decrease on last year. This might be bound up with the fact that the number of cases that the regulator reported was lower than before and, if projected out to the end of the year, would represent a 25% decrease on last year. Historically, however, there has usually been an increase in the number of cases that FINRA reports in the second half of the year. The totals for 2016 could be even higher.

The big cases

During the six-month period, FINRA reported 11 cases with fines of $1 million or more. Of those, four had fines of $5 million or more. To put that in perspective, during the first six months of 2015, FINRA concluded six cases with fines of $1 million or more and only one exceeded $5 million.

FINRA's largest fine in Q1-2 of this year was a $20 million one in connection with variable annuity replacements. The second largest was $17 million levied on two related firms that allegedly had inadequate policies and procedures to deal with money laundering.

The top issues for FINRA this year

So far, FINRA's disciplinary activities have related to variable annuities, 'due diligence,' money laundering controls, trade reporting and notes and bonds. Last year, FINRA looked primarily at trade reporting, suitability and advertising.

Brian Rubin rounded his survey off by saying: "These statistics bear out what we have heard from FINRA staff. We are in a whole new world...with these types of cases. Firms may want to minimise the impact by focusing on nuts and bolts issues such as the sale and marketing of their products, money laundering, trade reporting and policies and procedures."