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Finra Recoveries Increased Last Year in Broker Oversight Cases

January 08, 2013

Money ordered recovered by the Financial Industry Regulatory Authority rose last year from 2011 as it punished brokers who overcharged or sold unsuitable products, Richard Ketchum, head of Wall Street’s self-funded regulator, said in a phone interview.

Finra, deputized by the government to oversee brokers, ordered $34 million in restitution, up from $19 million in 2011, the organization said in an e-mailed release. Fines fell 5 percent to $68 million. Finra referred a record 692 cases involving potential fraud to the Securities and Exchange Commission and law enforcement agencies in 2012, compared with more than 650 a year earlier, the statement said. A record 347 of the referrals involved insider trading last year.

Finra has revamped its broker examinations to focus on areas most likely to result in investor harm and the “greatest risks,” according to Ketchum. These include disclosure, marketing and suitability issues for non-traded real-estate investment trusts, structured products, leveraged exchange- traded funds and new products such as bundled leveraged loans, Ketchum said. Examinations of brokers’ oversight of clients’ access to markets have shown deficiencies, he said.

“While firms have generally improved the quality of their supervision from a standpoint of direct market access, it’s still very spotty and very inconsistent,” Ketchum said in a phone interview. “We see a lot of foreign activity that raises very significant concerns both with respect to manipulation, sometimes with regard to account intrusion, and often raises anti-money laundering concerns. That area with respect to foreign direct access is going to be continuing.”

The exchange of information with non-U.S. regulators is “not perfect but it’s improved,” Ketchum said. Finra is in the best position it’s been in to pursue potentially manipulative activity involving foreign entities, he said.

To contact the reporters on this story: Zeke Faux in New York at; Nina Mehta in New York at

To contact the editor responsible for this story: Lynn Thomasson in New York at

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