(CN) - The Financial Industry Regulatory Authority (FINRA) is claiming significant achievements in 2011, despite a recent court ruling that stymies its ability to enforce fines, as well as fall-out surrounding allegations that it doctored reports it made to the Securities and Exchange Commission.
     The private corporation, born of a consolidation of the New York Stock Exchange's enforcement arm and the National Association of Securities Dealers, says it handed out a total of $63 million in fines, the highest levied by FINRA against brokers and their firms since 2005 when it recorded roughly $148 million in penalties.
     Fines after 2005 decreased by tens of millions for three consecutive years, hitting a low point in 2008 when FINRA levied only $40 million. The next year saw a $10 million spike, but dropped down to almost $43 million in 2010, along with $6 million in restitution paid to harmed investors.
     Those numbers are especially low when stacked against SEC fines, which topped out at a billion dollars in 2010. What's more, the SEC, a federal agency, has the authority to enforce and collect on fines. A recent decision by a federal appeals court in Mahattan all but neutered FINRA when it ruled in October that the non-profit, self-regulatory organization does not have the right to use the courts to enforce fines.
     The ruling comes at a time when FINRA has come under pressure to impose greater accountability on brokers and firms.
     "Our top priority is to protect investors," said Richard Ketchum, FINRA's Chairman and CEO, in a December 16 news release. "We are continually incorporating measures designed to root out products and practices that harm investors, as well as providing information and tools that help investors save and invest for their future and avoid costly mistakes. We remain committed to ensuring that those who engage in fraudulent or other activities posing a threat to investors are held accountable."
     And, there have been improvements. More than $19 million in restitution was awarded to harmed investors in 2011, over 1,400 disciplinary actions were taken by mid-December, 432 brokers were suspended from association with FINRA-regulated firms, 17 firms expelled from the securities industry and 317 individuals barred. The regulator says it has taken several other steps to improve its performance including beefing up activity in its Office of Fraud Detection and Market Intelligence (OFDMI), reconfiguring its exam program and adding to it resources and staff, developing cross-market surveillance patterns within its Market Regulation Department and enhancing transparency by expanding the Trade Reporting and Compliance Engine (TRACE), among others.
     But criticism of the organization remains, especially on the heals of allegations it doctored documents given to the Securities & Exchange Commission and what Forbes magazine's William P. Barrett, describes as "fierce pushback from its effort to get jurisdiction over investment advisors." It's a cost-saving idea backed by Congress, which would switch oversight of almost 12,000 investment advisors - they manage about $40 trillion - from the SEC to Wall Street's self-funded regulator.
     Former commissioner of the Texas State Securities Board, Denise Voigt Crawford, said she considers the move ill advised.
     "It's a very bad idea to expand the notion of self-regulation," she said in a Bloomberg News article published in June. "They're supposed to oversee the activity of the industry, but they are the industry."
     Barrett says there is also the still-breaking criticism of FINRA's "free-pass" policy in regard to Jon Corzine before the collapse of his MF Global Inc. and the disappearance of a billion dollars in customer funds.
     Complicating matters further is the fact that recently-released tax returns for 2010 show that FINRA chairman and CEO Richard G. Ketchum was paid $2.6 million, making him the highest paid regulator in the U.S. and part of the proverbial "1%." According to Barrett, that's 13 times the salary of Federal Reserve chairman Ben Bernanke, a man who has influence over the entire world economy.
     But FINRA says it's trying to do the right thing, with Ketchum listing in his press release several "high-profile" cases it referred to the SEC, federal and state law enforcement agencies. It also took disciplinary action against companies like Wells Fargo, Credit Suisse, Merrill Lynch, Medcap, Provident, DBSI, UBS Financial Services and Morgan Stanley.
     It remains to be seen what will happen with FINRA, which is trying desperately to show it has teeth. The October ruling declaring it does not have the right to use the courts to enforce disciplinary measures, however, was a painful blow for the independent regulator.