Q&A with Tara LaClair

Q: What is FINRA?

A: While sometimes mistaken for a government agency, the Financial Regulatory Authority, or FINRA, is actually a “self-regulatory organization” of the securities industry, registered as such with the SEC. FINRA, the largest independent regulator in the United States, regulates “member firms and their brokers and investment advisers.” FINRA was formed by a consolidation of the enforcement arm of the New York Stock Exchange and the National Association of Securities Dealers (NASD) in 2007 and describes its mission as “to protect America's investors by making sure the securities industry operates fairly and honestly.” In addition to administering, promulgating and enforcing securities rules and regulations, FINRA also provides information and educational resources to investors and operates the nation's largest arbitration (dispute resolution) forum for investors, member firms and their employees.

Q: Has FINRA's enforcement changed since the financial crisis of 2008? If so, how?

A: Since the turmoil in the financial markets during 2008 and the first quarter of 2009, FINRA enforcement and disciplinary actions have steadily increased. In 2009, FINRA reported filing 1,158 disciplinary actions, an increase of 8 percent from 2008, according to the recently released FINRA Sanctions Survey. In 2010, this number grew by 13 percent to 1,310 actions, and in 2011, the third straight year of growth, FINRA brought 1,488 disciplinary actions, another double-digit increase. These numbers represent a reverse of the slowdown that occurred between 2006 and 2008. FINRA also imposed 51 percent more fines in 2011 at $68 million, up from $48 million in 2010. While nowhere near the $184 million imposed in 2005, this increase may mean continued enforcement efforts in the near future. FINRA also barred more individuals from involvement in the industry in 2011, up 14 percent to 329 from 288 in 2010.

Q: What areas has the group been focusing on in its recent enforcement actions?