structuredVIEWS

FINRA Suitability Fines Up by 225% in 2018

Written by Chris Olson on Mar 07, 2019

As recently reported by Investment News, the law firm of Eversheds Sutherland issued a report summarizing 2018 fines imposed by FINRA.  The overall headline from their report is that the average fine per case in 2018 rose to $107,000, up from $65,000 the year before. But what caught our attention here at Structured Views even more is that total fines levied as a result of suitability violations amounted to $11.8M. That’s up by about 225% from 2017! This clearly show that suitability rightly remains a top compliance concern in investment management. And it also helps explain the growing interest in structured product platforms.

Without a doubt, financial technology makes suitability and compliance a lot easier to manage. Here’s why. There are three important levers to effectively manage suitability: 1) working with approved issuers only; 2) ensuring advisors work from an approved list of products for the month; and 3) ensuring proper review and approval processes are followed. Fintech platforms help enforce adherence to process and controls in all three of these areas.

By using a platform, you can limit the selection of products to only approved issuers. Furthermore, within each issuer you can easily select which of their products you want to include in your monthly calendar. Because this is done within the system, the process is more efficient. Instead of using separate email threads with each issuer to arrive at your product selection, you can go to one screen with a view across all issuers and make selections with a simple mouse click.

As for review and approval, an order-entry system allows gives you a full record of the approval process for each purchase. There are several layers of control and compliance – such as checkboxes, warnings, and a digital archive of all documents – to ensure that financial advisors are following the correct processes when submitting buy requests. Additionally, by providing separate logins for product managers and registered reps, certain products can be restricted to advisors who have completed their assigned training and certification programs (as determined by the investment firm).

For more information on how an order-entry system improves control and compliance, check out this post here.


Investment firms are leveraging the power of financial technology to streamline their order-entry processes, manage post-sales performance reports, and to improve their control and compliance. Are you ready to see what financial technology can do for your investment firm? Check out Luma today!

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This information is for distribution to institutional clients and is for broker-dealer use only. It is not intended to be distributed to individual retail clients. Any material provided is for information only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or financial instrument.

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