Is it a duel or is it a catfight?

Last week Hester Peirce and Robert Jackson, Jr. took a moment to bash the Financial Industry Regulatory Authority’s (FINRA) transparency during their Senate confirmation hearings to fill two positions with the Security and Exchange Commission (SEC).

Peirce, a senior fellow at the conservative Mercatus Center at George Washington University and a longtime FINRA critic, was previously nominated by the Obama administration. Jackson is a law professor at Columbia University who specializes in corporate disclosures. If approved as expected, both would complete the SEC’s five-member commission.

Small broker-dealer fears

Both nominees questioned the sufficiency of FINRA’s transparency (much in the news lately regarding discussions of where does the money FINRA collects in fines go) and recommended the Authority’s conduct be reviewed.

In an InvestmentNews article reported by Greg Iacurci, Pierce said she’d heard “from small firms that have concerns about their ability to be heard by FINRA.” She expressed concern that “the atmosphere now is one of you keep your head low and you do your thing, and you’re not even willing to raise issues when you see real fraud happening.”

Jackson concurred saying that FINRA should release more data and information on the “degree to which stockbrokers are engaged in fraud.”

Get the repeat offenders!

Expressing concern for unwary investors, Jackson expressed concern that “there are a number of repeat offenders in [the fraud] space.” He said he is unclear that “FINRA has been transparent enough in getting that information [about repeat offenders] to investors” to help them distinguish between an advisor who can actually help them plan for their retirement and someone who’s just going to take their money.

As reported in this blog previously, FINRA released a new statement explaining that brokers with:

• a demonstrated history of misconduct;
• patterns of repeat violations; or
• a history of previous employment at disciplined firms are all FINRA priorities.

Moreover, the statement continued, FINRA is strengthening its approach to high-risk brokers in three areas:

1. Creating a dedicated examination unit to identify and examine brokers who may pose high risk to investors;
2. Reviewing firm’s supervisory procedures for hiring or retaining high-risk brokers; and
3. Evaluating firm’s branch office inspection programs as well as their supervisory systems.

Transparency matters for everyone

The new SEC Chairman Jay Clayton said he would consider more transparency around FINRA board deliberations and on how it spends its fine proceeds. So, what’s good for the goose (you!) is now likely to be good for the gander (FINRA!). So, are you…transparent? Compliant? If FINRA can find itself in the SEC crosshairs, what does that mean for you? What are you doing to keep your organization on the “straight and narrow?”

Perhaps it’s time to schedule a chat? Let’s talk (212-233-1155). Then you can ask me about Patrina’s cost-effective and comprehensive, 8-module compliance solution and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.