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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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  • phil trupp

    Barney Frank was kind enough to answer questions on the auction-rate securities fraud when I was writing my book on the subject, RUTHLESS (you may read his comments on the ARS scandal when the book appears in September). I appreciated his candor. Mr. Kanjorski, on the other hand, was impossible to reach. One of his aids, Jason Pitcock, refused numerous requests to allow me an audience with his boss. Kanjorski was “too busy” working on financial regulation to take time to sit with an author working on a major book, I was told. This is hardly in the spirit of public service, let alone smart PR. Mr. Issa is another one who is not exactly fond of interviews. One must wonder why aides are so protective of elected officials. We put them in office, after all, to do their jobs and keep us informed. I have been writing about Washington since 1961, and I have never experienced such a dense code of silence that seemed to engulf government soon after the 2000 election. We need more information, not less. And those who fail to understand this will pay a penalty at the polls.

  • al ho

    What a den of thieves.

    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.

    Annette Nazareth also works for Davis Polk & Wardwell LLP, as well as ex-Sec Donaldson.

  • beth

    I would definitely listen in on Sunday’s radio show… good for you Larry!

  • Robert Decker

    Larry email me! I will fill your ears with horror stories
    over the past 5 years how FINRA has sat on their behinds
    doing nothing after I handed them on a silver platter
    repeat after repeat (over 300 times) illegal manipulation
    of stocks.

    I finally got SEC Enforcement to go after the criminals, but
    FINRA would not go after the co-conspiring brokerage firms that helped the criminals transact their crimes.

    300 investors Lost over $33 million and FINRA still does nothing.

    • john w

      ETrade was also “caught” laundering money}, Bloggingstocks reports,

      Why E-Trade Shareholders Should Worry About the $1 Million SEC Fine

      In the individual complaints made public on Wednesday, the S.E.C. said that the improper profits collected by the 14 specialist firms had ranged from a few million dollars at some of the smaller organizations to more than $28 million at E*Trade.

      E*Trade was one of six firms that settled cases that the agency had filed in federal court in Manhattan. Others named in those court cases, which all involved trading on the Chicago Stock Exchange, were Automated Trading Desk Specialists, now owned by Citigroup Derivatives Markets; Melvin & Company and its subsidiary, Melvin Specialists, which has been dissolved; Sydan LP; and TradeLink. Improper profits in those cases totaled $35.7 million, the S.E.C. said.

      In those cases, the agreements are still subject to final approval by the court, said David Rosenfeld, the associate director in the S.E.C.’s New York office.

      Lawyers for E*Trade, Automated Trading Desk, the Melvin units and Sydan did not respond to messages left at their offices on Wednesday. Lloyd Kadish of TradeLink declined to comment on the case.

      Only enforcemnts ever dribbles out of the SEC, and that is insufficient. FINRA is more crooked than used car dealers.

      E*Trade fined for front running just last year, and FINRA does nothing!!!
      The New York Times recently reported,
      14 Trading Firms Settle Charges for $69 Million

  • Bill

    I have subscribed to the Wall St. Journal for decades and still do, but my regard for it has taken a real tumble because of its coverage of the auction rate securities scandal. I believe the WSJ to have been co-opted in the same manner as other financial media, to wit its financial interests lay in either ignoring the matter or sugar coating it. I think I have previously detailed on this blog how the Journal ran an article concerning TD Ameritrade and auction rates, after which TD Ameritrade commenced running full page ads in the Journal, and no further stories appeared on Ameritrade and auction rates with the exception of a final one on the consent order between TDA and SEC on ARS. The story incredibly was a positive spin on TDA, omitting the salient fact that TDA was censured by SEC for violation of the section of the Securities Act of 1933 dealing with fraud. I received no response to my emails to the writer of the story and the editor of the Journal on this glaring omission.

  • john w

    On sending Wall Street to Jail….
    good article

    A writer’s comment left at Crime and Federalism was quite foretelling,

    Sending Wall Street to Jail

  • Vin

    I have been the victim of a personal corrupt vendetta organized by Ms. Merril and her staff especially Greg Firehock. She has coordinated with other enforcement agencies. Why? because I have fought back. They use tremendous resources to squash all the small guys and if you fight them, they will destroy you. Or as Firehock told my attorney, “we will get him”! I since have succeeded in having some investigations started. I even have initiated a $1 Billion lawsuit against Finra and others. Also, I have spoken directly with a couple of Senators and Congressman about the abuse. Its obvious I will only succeed if the politicians that real people are getting hurt and they need a few heads to prove they are “protecting” the public. banning and fining all the small guys is a scheme of ant-competitiveness. Fining the “big guys” with shareholder money and only a small portion of what they steal everyday is a coordinated business model. Sounds to me Ms. Merrill has had a front row seat and has made millions and is getting out before the kitchen gets too hot. I personally will not forget and will continue to pursue her. I will have my day when she sits down for a deposition. Finra and others have to be stopped. The lawyers have gone too far once again!

    • Gloria

      Dear Vin,

      I was screwed by Stock Broker, His Brokerage Firm, My Attorneys, The Mediator, the Federal Judge, Florida Bar, Office of Financial Regulations. I’m running out of money and I can’t seem to get any help….I’m a diovrced Mom of twins 18 years old. Because of the nightmare I’ve been through, I’ve now been diagnosed with Lymphoma.

      I read your comment. I’d like to join your fight….These Corrupt people need to be stopped.

      Please e-mail



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