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FINRA’s Enforcement Chief, Susan Merrill, Quits; How About a Subpoena?

Posted by Larry Doyle on March 18, 2010 10:52 AM |

Will Susan Merrill provide America with a window into the scams perpetrated by Wall Street on the American investing public? Who is Susan Merrill? Let’s navigate.

Those charged with protecting the public interest must be held to an appropriate standard. In order to promote public trust, these organizations and their executives must be held to account. If need be, that accounting should include legal discovery and, if warranted, a subpoena as well.

Susan Merrill, the head of enforcement of Wall Street’s self-regulatory organization, FINRA, is stepping down after having occupied this role for three years. Think she knows some things that the American public would like to know? No doubt.

In fact, in my opinion, Ms. Merrill most likely has a wealth of information that American investors (those she was charged to protect) and the American public at large DESERVE to know.

Let’s review The Wall Street Journal’s take on Ms. Merrill’s departure, with my Sense on Cents critique and questioning interspersed into the Journal’s article. The WSJ writes, FINRA’s Susan Merrill to Exit as Enforcement Chief:

The executive hired by Wall Street to enforce its rules is stepping down after nearly three years in which the organization’s disciplinary actions and fines against the brokerage industry have declined, the group said.

Ms. Merrill, 53 years old and formerly a litigation partner at law firm Davis Polk & Wardwell LLP, was hired by the New York Stock Exchange in 2004 to help revive is regulation division.

Revive? Does this mean that regulation prior to Ms. Merrill’s arrival at the NYSE Regulation (a predecessor to FINRA) was even worse than what transpired under Ms. Merrill? Wow.

She became head of enforcement at Finra in 2007 when the National Association of Securities Dealers merged with the regulatory arm of the NYSE, forming Finra.

Ms. Merrill, who made $1.4 million in 2008, was tapped to run the combined division by Mary Schapiro, who ran Finra until early 2009 when she left to head the Securities and Exchange Commission.

Pretty good money for a non-profit.

Ms. Merrill’s tenure has met with mixed success. She helped to successfully merge the enforcement departments of the NASD and NYSE, and brought a number of auction-rate-securities cases against Wall Street firms. Last week, Thomas Weisel Partners Group Inc., in a regulatory filing, disclosed it had set aside $4 million to pay an expected fine by Finra to settle an investigation involving the securities. Weisel said in the filing the fine could “adversely” affect the firm.

Success from whose perspective? The referenced ‘successful merger’ incorporated strong allegations of misrepresentations (that is, lies) in the proxy statement utilized for the merger. The legal complaint making that allegation (read an overview of Standard Investment Chartered and Benchmark Financial v FINRA) was recently dismissed, but the appeal has already been filed. What was the basis for the dismissal? The judge ruled that this merger fell under FINRA’s regulatory activities and was thus covered by FINRA’s claims of absolute immunity. Hopefully, the appeal provides real transparency so the American public can learn the truth about these allegations of lying in a proxy statement.

In regard to auction-rate securities, is The Wall Street Journal serious in defining FINRA’s handling of this market sector, the greatest of Wall Street’s frauds, as a success? Approximately $150 BILLION auction-rate securities remain frozen. FINRA has been involved in successfully returning an extremely small percentage of those frozen funds. This is success? A $4 million fine for Thomas Weisel against $150 BILLION in frozen ARS? Success? Thomas Weisel can ‘cry me a river.’ In regard to Ms. Merrill, if this is success, then America will NEVER experience failure. Shame on The Wall Street Journal for this ridiculous assessment.

I am not finished with Ms. Merrill and the auction-rate securities topic. What does she know about FINRA’s liquidation from its own internal investment portfolio of $647 million ARS in mid-2007. Yes, at that point the ARS market had started to fail before totally freezing in early 2008. Did FINRA possess material, non-public information and act upon it in the liquidation of those ARS? The public DESERVES to know this information.

Moving right along, The WSJ adds,

In 2008, amid the crisis, Finra often filed cases against small players. Along the way, regulators, including Finra, failed to stop a number of abuses that led to the financial crisis and didn’t uncover the Ponzi scheme run by Bernard Madoff.

What does Ms. Merrill know about the allegation embedded in the Amerivet Securities v FINRA case, yet to be heard, which claims that FINRA’s internal investment portfolio had money with Mr. Madoff? (See details including video here in which, Attorney Claims Wall Street’s Cop, FINRA, Invested in Madoff).

During the past few years, disciplinary actions filed dropped, to 1,158 cases in 2009 from 1,399 in 2005. Enforcement fines against firms have, in percentage terms, declined. Finra levied fines against financial firms totaling $25.9 million in 2008, according to Finra, and $50 million in 2009, according to people familiar with the matter. Fines levied by Finra or one of its predecessor agencies declined for three years before 2009. The predecessor organization collected $148.5 million in fines in 2005.

America deserves to hear from Ms. Merrill on all these topics. I will offer her an open invitation to come on No Quarter Radio’s Sense on Cents with Larry Doyle any Sunday evening from 8-9pm.

Does Ms. Merrill have a conscience? Is she willing to publicly address and answers these questions? If not, then she deserves to be subpoenaed by Congress and provide a full accounting.

How much longer does America have to wait to learn who, how, when, where and why our financial regulators failed?

Paul Kanjorski, do you hear me? Darrell Issa? Barney Frank? Are you listening? America DESERVES answers!!

Do your jobs!!!

Color, comments, questions always appreciated.


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