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FINRA Immunity Without Transparency Is “A License to Steal”

Posted by Larry Doyle on March 2, 2010 10:40 AM |

Judge Jed Rakoff’s ruling to dismiss the complaint by Standard Investment Chartered v FINRA based on the regulator having absolute immunity generated a consistent response from readers and colleagues. What is the theme of that response?

A comment by Bill, a loyal Sense on Cents reader, seems to sum it up best:

Interesting that FINRA has the benefit of a quasi governmental entity, i. e. immunity, but not the customary burden of a governmental entity–transparency. Otherwise known as a license to steal.

Those within FINRA or the industry may view that claim as unfair or unreasonable. That said, unless and until FINRA were to choose to answer the charges embedded in the Standard Investment Chartered and Amerivet Securities cases, this writer will view this self-regulator in the same manner in which Harry Markopolos defined it a year ago, that is, as being ‘in bed with the industry.’

Did FINRA steal, or allow those they were charged with regulating to steal? Judges will rule and we need to live with those rulings, but what would the court of public opinion have to say? Perhaps we should ask FINRA’s smaller member firms, those investors ensnared in the Madoff scam, the Stanford Financial scam, the auction-rate securities scam. These entities and individuals scream everyday that the regulator and the industry have stolen their wealth and well being.

America wakes up today with the knowledge that the chief regulator of our financial markets is no real fan of transparency. If she were, Mary Schapiro would have opened FINRA’s books far and wide for all the world to see.

How are investors supposed to proceed going forward? Given that those charged with protecting investors are not willing to provide real transparency, the markets are a decidedly riskier proposition.

Navigate accordingly.

Comments, color, constructive criticism always appreciated.

LD

  • Scott

    I believe as one wholesaler put it to me, we should get a petition going. He stated he could easily get 10,000 names. The people at FINRA are shameless, and have no integrity. It is no wonder so many small BDs have gotten out of the business. Of course, they realized many went to an RIA, hence the move to attempt to control and regulate them as well. Regulation has its place, but there should be total accountability for them as well.

  • disenchanted

    It is not just the small BD’s that are bleeding right now, the investing public was just as harmed by this ruling. They have the right to know that the regulator they are depending on is honest and righteous, extending now to the SEC. It is obvious that the public opinion is not very good at this time.






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