Tallahassee Journal

Record number of brokers barred, suspended in 2015

Record number of brokers barred, suspended in 2015

A record number of punishments were levied against bad brokers in 2015 by the Financial Industry Regulatory Authority (Finra), the brokerage industry’s personal regulator. In 2015, 492 brokers were barred from Wall Street and 737 were suspended, according to data released by Finra on Tuesday. That makes 2015 the toughest year for wayward brokers since at least 2001, according to an analysis.

Unfortunately for investors, the man responsible for the gains in cleaning up Wall Street — Finra’s Chairman and CEO Richard Ketchum — is retiring. That has raised questions about what type of replacement Finra, which is funded by the very industry it oversees, will hire. Ketchum, who announced his retirement from Finra last year, has also ratcheted up disciplinary actions against brokerage firms since he took over in 2009, with a total of 197 firm expulsions and suspensions in that time. That compares to 170 expulsions and suspensions over the previous seven years, the data show.

In an interview, Ketchum said he is “quite confident” that Finra’s improved record of expelling bad brokers will continue when he is gone. “The board embraces the same goals I have, and whoever replaces me will be equally focused on that,” he said. Finra’s record for levying fines against the brokerage industry under Ketchum is more mixed. In 2015, Finra levied fines of $93.9 million against the industry in 2015, the regulator said Tuesday. That’s down from $134 million in fines levied in 2014 and $135 million in 2005, before he joined. Restitution for brokerage customers came in at $96.2 million last year, up from $32.3 million in 2014 but down from $1 billion set in 2008.

Still, Ketchum has undoubtedly helped make the regulator tougher when it comes to spotting and getting rid of rule breakers. Brokers can be barred or suspended for various offenses, such as excessive or unauthorized trading in customers’ accounts to increase commissions or other fees. The uptick is the direct result of Finra’s decision, under Ketchum, to ferret out problem players through changes to Finra’s broker examination program, which has helped the regulator focus on the highest risk brokerages and brokers.

“What we have today is enforcement investigations and actions that relate to instances where real customers are harmed. We are able to identify bad brokers and the highest risk brokers and we are moving them out of the industry more quickly,” Ketchum said. Ketchum, who was previously CEO of NYSE Regulation and president of the Nasdaq Stock Market before that, said he plans to spend his remaining months on his latest pet project: an assessment of brokerage member’s culture. The goal is to persuade member firms to address their conflicts of interest and to implement a zero-tolerance policy when it comes to material breaches for firm polices and procedures.

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