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FINRA Board to Form Committee to Review Claims of Schapiro Misconduct

Posted by Larry Doyle on February 12, 2010 4:53 PM |

When in doubt, form a committee and have more meetings. This rope-a-dope style of leadership is all too prevalent in our nation. Why is it that the Wall Street-Washington incest can not be exposed for what it really is? When will somebody in our country display integrity and leadership while acknowledging the existence and stench of this incest?

Recall that the board of FINRA was meeting this past Wednesday to address allegations of misconduct by Mary Schapiro and other FINRA execs. Although the media has presented this meeting as merely addressing questions of excessive compensation for Ms. Schapiro and others, the allegations of misconduct made by attorneys for Amerivet Securities run far deeper than that.

These allegations address the following:

1. FINRA’s liquidation of its own auction-rate securities ($647 million ARS in mid-2007 as the market was failing…how fortuitous).

2. FINRA’s oversight of failed broker-dealers Bear Stearns, Lehman Bros, and Merrill Lynch.

3. FINRA’s management, or dare I say mismanagement, of its own internal investment portfolio, including the allegation that it had invested in Bernie Madoff.

4. FINRA’s excessive compensation practices.

How did the FINRA Board respond? Bloomberg reports, FINRA Committee to Review Claim Managers Are Overpaid:

The Financial Industry Regulatory Authority said a committee will review claims that its managers are overpaid after a California broker complained about the $3.25 million that Securities and Exchange Commission Chairman Mary Schapiro got in 2008 as Finra’s chief executive officer.

Finra, in a letter sent today to the broker’s attorneys, said it created a panel to “investigate the allegations.” The Washington-based regulator, which oversees more than 5,000 U.S. brokerage firms, said its board of governors made no judgment on the merits of the claims.

Schapiro received a $937,961 salary in 2008, a bonus and incentive compensation worth $1.75 million and other pay totaling $565,995, according Finra’s most recent tax filing. She also got a $7.2 million “defined-benefit plans” payment.

Lawyers representing Elton Johnson Jr., president of Moreno Valley, California-based Amerivet Securities Inc., said the pay was “excessive” given Finra’s regulatory performance and because the value of its investment portfolio declined $568 million that year. The attorneys, Jonathan W. Cuneo and Richard D. Greenfield, urged Finra in a Dec. 4 letter to recoup bonuses paid to Schapiro and other executives.

Finra’s board discussed the claims at a meeting this week and “in accordance with customary practice,” decided to form a panel to review them, the regulator’s General Counsel T. Grant Callery wrote in the letter today to Cuneo and Greenfield. Finra spokesman Herb Perone declined to comment beyond the letter.

Amerivet’s Johnson filed a lawsuit against Finra in August, saying it failed in regulating Bear Stearns Cos., Lehman Brothers Holdings Inc. and Bernard Madoff’s securities firm. The complaint seeks access to Finra documents to help Johnson determine what triggered the investment losses.

Finra, which is overseen by the SEC, gets its funding from the securities industry.

First things first, who will sit on this committee? Will it be independent? How will it review these allegations? Will it have the power to subpoena? Will it hold open hearings? Over and above these questions, I repeat my questions and points raised in my commentary of February 4th, “FINRA Board to Address Allegations of Schapiro Misconduct”:

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?


Not for nothing, but the fact that the board releases this statement of intentions on a Friday afternoon also speaks volumes. What backbone!!


Come on Mary, answer to America!!

Stop hiding and unseal these books and documents. Little nervous about what America may learn? If you have nothing to hide, then why are you fighting so hard to keep documents sealed? America wants transparency. Will you give it to them?

Sense on Cents is very patient yet very determined to keep fighting for the truth, transparency, and integrity America so badly deserves.

The truth will out!


  • Scoop

    Hit, hit, hit….and then hit some more!!

  • John Wallace

    Financial Perversions Sold During Credit Boom

  • Disenchanted

    When is the truth going to prevail. It
    was quite obvious during the road shows
    that there were many “untruths” being
    told.The Board needs to open the doors
    and consider all allegations, not just
    compensation. I guess that since there
    are no Supervisory procedure manuals or
    AML procedures, or 3012, or 2011 filings,
    there is nothing for them to look at. After
    all, during an audit, those are the most
    important things. Paying attention to
    whistle blowers, or looking for phoney
    trading is not important, especially
    if you are one of the good old boys. Stop
    picking on the little guy and go after
    the real criminals. A good place to
    start would be with the executives (pastof
    and present) of Finra and then work
    down the ladder.

    • LD


      Your comment is very strong and I am deeply appreciative of your sharing it here.

      It seems rather obvious that you were present during the road shows when Schapiro et al were making the case for the successful merger of NASD with NYSE Regulation to form FINRA. Your assessment of many ‘untruths’ during the road shows screams for further exploration. Here’s hoping the present lawsuits and complaints against FINRA will be successful in exposing the inner workings and operations, both past and present, of FINRA. Let the chips fall where they may.

      Your comment on the good old boy network is also consistent with those who believe Bernie Madoff was so closely aligned with those inside FINRA (previously NASD) that he was able to operate effectively without oversight.

      Your summary as far as starting by investigating the executives of FINRA, past and present, and then going from there is in sync with the lawsuits brought on behalf of Standard Investment Chartered and Amerivet Securities.

      Sense on Cents will continue to address the lack of transparency in this organization, FINRA, and I strongly encourage you to spread the word. Please have friends and colleagues also leave their thoughts and comments here as well. Sense on Cents is beholden to nothing more than the virtues of truth, transparency, and integrity throughout our system so we can all most effectively navigate the economic landscape.

      I thank you and commend you.

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