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FINRA Board to Address Allegations of Schapiro Misconduct

Posted by Larry Doyle on February 4, 2010 11:40 AM |

Are the wagons circling around Mary Schapiro and her former FINRA colleagues?

Regular readers of Sense on Cents are familiar with the issues and concerns I have raised repeatedly with Wall Street’s self-regulator, FINRA. I continue to believe the issues embedded within this self-regulatory organization lie near the heart of what I deem the Wall Street-Washington nexus.

Perhaps America will learn more about these issues soon. Why? Next week, FINRA’s Board of Directors will address alleged wrongdoings by Ms. Schapiro et al. What are the issues?  Please review this release put out this morning highlighting a number of questions I have been asking for the last year.

Will the Board realize it ultimately needs to be accountable to ALL its member firms and, by extension, to the American public at large? Will the Obama administration compel the Board to provide the transparency America so badly wants?



Feb. 10 Closed Door Board Meeting to Consider Broker-Dealer’s Allegations

WASHINGTON, DC, February 4 — On February 10, 2010, the Board of Governors of the Financial Industry Regulatory Authority, Inc. (“FINRA”) will consider allegations of gross mismanagement set forth in a December 4, 2009 letter to the Board on behalf of Amerivet Securities, Inc. (“Amerivet”), a member of FINRA.

The letter demands that FINRA take action against Mary Schapiro and other senior FINRA executives to recover excessive compensation and unprecedented portfolio losses stemming from FINRA’s dismal 2008 regulatory and investment performance. In 2008, Ms. Schapiro’s last year as FINRA chair, that organization:

Failed to act against Bernard Madoff and Robert Allen Stanford, who perpetrated two of the largest Ponzi schemes in history;

Failed to act against large FINRA members Lehman Brothers, Bear Stearns and Merrill Lynch in connection with their roles in the subprime mortgage securities scandals;

Failed to warn investors about Auction Rate Securities (ARS) problems, after FINRA had liquidated its own ARS holdings in mid-2007, but before the ARS market “froze” and there were any public disclosures about the risks inherent in such “investments”;

Suffered nearly $700 million in loses;


Broker-Dealer: “Schapiro and Colleagues Bilked FINRA of Millions”

Amerivet principal, Lt. Col. Elton Johnson (U.S. Army Reserve), an Iraq War combat veteran, stated:

“Despite President Obama’s call for accountability for wrongdoing, past and present, Mary Schapiro and her colleagues have thus far gotten away with bilking FINRA of tens of millions of dollars in 2008, even as that self-regulatory organization failed in its fundamental responsibility to protect investors, and FINRA sustained nearly $700 million in financial loses. It is ironic that Mary Schapiro received a salary more than 15 times that of a four star general, while FINRA was, by any measure, failing miserably.”

Whistleblower: FINRA “Definitely In Bed With Industry”

During his 2009 testimony, Madoff whistleblower Harry Markopolos told Congress that FINRA is “definitely in bed with the industry” and “[gets] an A+ for corruption.” Separately, a report from SEC Inspector General David Kotz quotes Bernard Madoff as referring to Ms. Schapiro as a “dear friend.”

Attorney Richard Greenfield added:

“The excessive compensation packages for the FINRA self-regulatory executives who failed to regulate represent cynical and hypocritical examples of the incestuous Wall Street-Washington relationships that have incensed voters across the United States.”

Amerivet is a small broker-dealer located in Moreno Valley, California and a member in good standing of FINRA. Lt. Col. Johnson has been an officer in the United States Army Reserve for 24 years. He has completed two tours of duty in Iraq, he is currently on active military duty at Fort Irwin, CA, and he will soon begin preparations for deployment to Afghanistan later this year.

What will the Board do? For whom are they working?

High time we received real truth, transparency, and integrity.


To reference all my stories over the last year regarding Mary Schapiro and FINRA, go here.

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  • Lou

    About time, no?

  • John Wallace

    This is big, thanks Larry !!! You are the man exposing all of Wall Street’s and FINRA’s crimes, they have to be reading your column too!

  • John Wallace

    sharing an article I read on Kitc’s site of a guest editor.

    In this report, we list a summary of events creating and causing our global economic problems in chronological order covering the last ten years. It is helpful to understand where we’ve been and where we are going for personal security and potential gains in trading and investing. Our Northern Advisor is one our most brilliant sources of information. He has provided things for me that in my view are priceless and without parallel. I have known him to be extraordinarily far-sighted and extremely accurate on his forecasts. His perspective is one that is truly unique.

    Derivatives Scam Slides Into The Sunshine

    Roger Wiegand
    Editor Trader Tracks Newsletter
    The Jay & Rog Blog at

  • Bill

    Be interesting to see if this is just
    a whitewash. If they’re serious, they
    will engage some outside party to
    undertake the investigation. They’ve
    acted like some offshore hedge fund in
    terms of transparency, instead of a
    regulatory authority.

  • coe

    Call me a cynic, but my eyes were drawn to two words – “closed door” – I’m not sure I ever have seen them linked in a phrase with “transparency”…Hope springs eternal, yet hope is not a strategy…here’s to tilting at windmills

    • Scoop


      Good point about it being a closed door meeting but for that very reason, this story needs to get into the court of public opinion so the public pressure compels the board to provide real transparency.

      If everything was fine on all these fronts, why wouldn’t FINRA have already opened their books and said “all good here.”

      Maybe we can take a look through the peephole….or pretend to be delivering pizzas to their meeting.

      • coe

        Scoop – right you are…my bad for the “glass half empty” discouraging word…here’s to LD for applying the relentless pressure on the ARS travesty …hmmmm, there’s something about Mary!

  • Between FINRA and SEC, Who is Winning the Race to the Bottom?

    FINRA is empowered by the federal government to protect American investors from fraud and bad practices. One of the basic objectives of the Securities Act of 1933 is to prohibit deceit, misrepresentations, and other fraud in the sale of securities.

    After a second financial crisis in a decade, it appears that neither FINRA nor the SEC has cause to celebrate.

    Will financial reform remain illusive without transparency and independence; i.e., full disclosure of what really goes on at FINRA and the SEC by an independent third party?

    Should FINRA and SEC employees be required to anonymously disclose information about the business practices of their organization and its leadership to an independent third party who can disseminate this information to Investors and the Public?

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