New research has revealed the banks and brokers that have been hit with the biggest financial penalties and the most commonly fined offences – with one bank racking up $82billion in fines.
The study by BrokerChooser analysed fines imposed upon companies in the financial services sector from 2000 to the present day in the US to reveal the most heavily fined banks and financial offences.
Three Biggest Banking Fines
1. Bank of America – $16.65billion (2014)
The Bank of America actually accounts for half of the top ten biggest fines of all time, but by far the biggest was the one that they incurred in 2014, for knowingly selling toxic mortgages to investors, a big contributor to the financial crisis of the late 2000s.
The selling of these mortgages ultimately led to a housing bubble that burst spectacularly, with ramifications for the global economy for years to come, and the bank was fined a then-record $16.65billion.
2. JPMorgan Chase – $13billion (2013)
Another of the big US banks, JPMorgan Chase takes second place, with JPMorgan Chase being forced to pay $13billion in 2013, which again was a record fee at the time.
Similarly to Bank of America’s mega-fine, it was to do with toxic securities abuses in the time of the financial crisis and was agreed upon after lengthy negotiations with the US Justice Department.
3. UBS – $11.15billion (2008)
Swiss investment bank UBS was fined $11.15billion for investor protection violation offences, agreeing to buy back $11billion in securities and pay an additional $150million fine.
They were found guilty of misrepresenting auction rate securities to investors, concealing the true liquidity risk of the products.
Top Three Most Fined Banks
1. Bank of America
Number of penalties: 251
Total amount penalised: $82.9billion
The Bank of America has the dubious honour of the largest one-off fine of all financial organisations, but this only makes up a fairly small percentage of the total amount that they’ve been fined over the years, clocking up a total of over $82billion across 251 different fines over the past 20 years.
Many of these fines relate to the 2008 financial crisis and companies that Bank of America bought during this time such as Merrill Lynch and Countrywide.
2. JPMorgan Chase
Number of penalties: 179
Total amount penalised: $35.9billion
As was the case with one-off fines, JPMorgan Chase takes second place behind Bank of America, although by some distance, with fines totalling $35.9billion.
The biggest of these was for $13billion in 2013 and one of the most recent was a $250million fine over weak controls in its wealth management division in 2020.
Number of penalties: 150
Total amount penalised: $25.5billion
The Citigroup investment bank and financial services corporation has been fined over $25billion across 150 different fines over the years, with the biggest of these being $7.1billion that was bought back in missold securities in 2008.
This was closely followed by a $7billion fine with the Justice Department over the group’s role in selling mortgage-backed securities that were paid in 2014.
The Most Heavily Fined Offences
1. Toxic Securities Abuses – $97billion
The offence that saw the heaviest penalties overall for financial institutions was ‘toxic securities abuses’ which refers to the sale of investments that are either difficult or actually impossible to sell on, due to demand for them collapsing.
While $97billion was fined for this offence in total, the actual number of fines handed out was only 96, meaning that each fine amounted to just over a billion dollars on average.
2. Investor Protection Violation – $68billion
In second place, there were over 1,400 fines that added up to over $68billion for breaches of the Investor Protection Act, which was introduced in 2009 in the wake of the financial crisis and aimed to prevent the same problems from happening again.
This regulation covers things such as new financial products, fee structures and trading structures, to ensure that investors aren’t caught out by shady practices.
3. Mortgage Abuses – $56billion
83 fines were handed out for offences within the mortgage sector, but they added up to over $56billion, meaning that each fine was worth an average of over $680 million.
Many mortgage lenders have landed themselves in hot water over the years and each of the biggest fines handed out in this sector went to the Bank of America, including the mega $16.65 billion fine.
Top Three Biggest Investment Broker Fines
1. Robinhood – $70million
Robinhood is one of the best-known trading apps around and experienced rapid growth, going public with its IPO in July.
However, it is also currently facing multiple lawsuits and was recently hit with a $70million fine by the Financial Industrial Regulatory Authority (FINRA), the largest fine ever levied by the agency, for “systemic supervisory failures” and “false or misleading information”.
2. Ally Invest – $52million
Ally Invest paid the US Justice Department $52million in 2016 after allegations that its subsidiaries had wrongly sold subprime residential mortgage-backed securities (RMBS) back in 2006 and 2007.
The settlement agreement also meant that Ally had to immediately cease operations of its registered broker-dealer, Ally Securities, LLC.
3. CITIC Securities – $48million
CITIC Securities was among three big brokers in China that were heavily fined in 2017 for their role in the 2015 stock market crisis in the country.
They were fined 308 million yuan by the China Securities Regulatory Commission (CSRC), which translates to about $48 million.