by Howard Haykin

FINRA reported improved financial results for 2016, earning nearly $100 million more in net income that it did the prior year. For 2016, FINRA had net income of $57.7 million on more than $1 billion in net revenues; in 2015, FINRA had lost $40 million on net revenues of $993 million in 2015.

To achieve those results, FINRA had to rely, in large part, on regulatory fines. In 2016, fines rose by $80 million to $174 million - while operating revenues declined by $54 million to $845 million. Interestingly enough, the number of monetary sanctions decreased about 10% to 624 in 2016, from 691 in 2015. FINRA also reported a $70 million swing in investment income.

FINRA STATISTICS.

• 785 cases referred for prosecution to the SEC and other federal or state law enforcement agencies
• 439 potential market manipulation cases referred to the SEC
• 97 potential Reg M violations detected by cross-market patterns referred to the SEC
• More than 5,550 exams conducted in 2016
• $174 million in fines
• $28 million in restitution to harmed investors
• 24 firms expelled, 727 brokers suspended, 517 brokers barred, 1,434 disciplinary actions

FINRA recognizes fines upon issuance of a written consent or disciplinary decision. We do not view fines as part of our operating revenues. The use of fine monies is limited to capital expenditures and regulatory projects, such as our efforts to leverage technology innovations and the Cloud initiative, and other projects as appropriate, which are reported to and approved by our Finance, Operations and Technology Committee and Board.