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FINRA Owes America Answers on These Proposals

Posted by Larry Doyle on June 22, 2010 1:28 PM |

FINRA can talk about transparency and integrity all it wants. We all know talk is cheap. FINRA’s board and executives need to show America how they truly define and embrace transparency and integrity. How so?

FINRA is scheduled to hold its first Annual Meeting in almost three years on August 2nd. In anticipation of that meeting, FINRA member firm Amerivet Securities has submitted seven proposals to be included in the FINRA proxy materials. The FINRA board and executives owe their member firms, and ultimately America, the opportunity to address and then receive complete answers on each of these proposals.

As a reminder, Amerivet Securities principal Lt. Col. Elton Johnson has filed a complaint against FINRA. The complaint is embodied in my commentary from last August, “BREAKING NEWS: Amerivet Complaint Against FINRA Alleges Madoff Investment.”

As a point of interest, Lt. Col. Johnson will not be in attendance at the upcoming FINRA Annual Meeting. Why not? Well, it just so happens that Johnson will be deployed for service to the United States Army Reserve in Afghanistan at that time!

What is Amerivet requesting? What do the FINRA board and executives need to address? The following proposals are highlighted in a document submitted on behalf of Amerivet (link to full document provided at the end of this commentary):

Proxy Proposal 1 – Disclosure of Compensation of FINRA’s Top Ten Most Highly Compensated Employees
Beginning in its 2011 Annual Report and annually thereafter, FINRA shall disclose the compensation, both direct and indirect, of its top ten most highly compensated officers. FINRA shall also disclose any and all compensation, direct or indirect, to any compensation consultants employed by FINRA and/or the Board.

Proxy Proposal 2 – Independent Study of Current and/or Former FINRA Officer and/or Director Involvement with the Madoff Family
FINRA shall commission an independent study of the dealings between present and/or former FINRA officers and directors, on the one hand, and Bernard L. Madoff, members of his family and/or their respective affiliates on the other.

Proxy Proposal 3— – Transparency of FINRA Investment Policies, Practices and Transactions
FINRA shall publicly disclose the identities of all persons it consults or does business through in connection with the investment of its assets, including all financial institutions or advisors involved in the purchase or sale of any FINRA assets of any kind including those held in any FINRA retirement plans.

Proxy Proposal 4—- FINRA Board of Governors Meetings to Be Made Public Except When Absolutely Necessary
Beginning on September 1, 2010, transcripts of all meetings of the FINRA Board of Governors and/or Committee of the Board shall be made public on FINRA’s website within 30 days following each such meeting. The Board by affirmative vote can close those portions of the meetings when non-public regulatory matters are on the agenda or to be discussed and confidentiality is warranted.

Proxy Proposal 5 – “Say on Pay” for Top Five Most Highly Compensated FINRA Employees
Beginning in 2011, at least once in each year, FINRA members shall have a non-binding vote on the compensation levels of the top five most highly compensated FINRA employees.

Proxy Proposal 6 – Creation and Employment of an Independent Private Sector Inspector General
Beginning on September 1, 2010, FINRA shall employ an independent private sector inspector general (“Inspector”) on a standing basis to investigate claims of misconduct by FINRA executives and employees or others acting on its behalf. The reports of the Inspector shall be filed with the FINRA Board of Governors, the Securities Exchange Commission, the Senate Committee on Banking and the House Committee on Financial Services.

Proxy Proposal 7 – Disclosure of IRS Correspondence Concerning $35,000 NASD Member Payment
FINRA shall immediately make available correspondence between NASD (including its lawyers, agents and employees) on the one hand, and the IRS on the other hand, concerning the regulatory consolidation of NASD and the regulatory arm of NYSE, provided that FINRA members first sign a confidentiality agreement in substantially the form posted on the website.

There you go. In light of everything our country has experienced, who in America could possibly have a problem with the transparency and integrity encompassed in these proposals? America deserves answers to these proposals. FINRA must remove the incestuous blanket it has wrapped itself in over the years. No longer can FINRA be allowed to operate as an entity described by Harry Markopolos as ‘in bed with the industry.’ These proposals will go a long way in pulling that cover back.

I call on President Obama, Treasury Secretary Geithner, Fed Chair Bernanke, SEC Chair Schapiro, Congressmen Issa, Frank, Kanjorski, Senators Dodd, Schumer, et al to compel FINRA to embrace these proposals. America deserves nothing less than total transparency, and will learn a lot in this process.

I strongly encourage those who care about our markets, our economy, and our country to review the explanatory notes supporting these proposals in the linked 9-page document (click on image below). I almost laugh when thinking that Lt. Col. Johnson’s proposals and explanatory notes run a full three pages longer than the FINRA Chairman and CEO ‘2009 Year in Review‘ highlighted here at Sense on Cents earlier this morning.


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  • Great article Larry,

    I especially like Proxy Proposal #2. I would love to be in charge of that probe.

    Keep up the good work.

    Rick Johnson

  • disenchanted

    I hope this gets enough backing to become a reality. The problem I see, and have been saying it forever, is Judge Rakoff’s ruling. If there’s a Securites Attorney reading this, maybe you can shed some light on how to be sure these proposals will not be overturned due to the immunity ruling.

  • John W


    as they protect the criminal and the victims get stonewalled, and further punished.

    My case in point is of course the ONGOING AUCTION RATE SECURITY FRAUD that only LD, a handful of others give a rats azz about. ( us victims still “frozen” in this CRAP for 2 1/2 years notwithstanding,) while the pond scum brokers ( firms and individuals ) are still free to continue lying and stealing with no rammifications!

    BROKERS NEED TO BE SUBJECT TO THE CIVIL/CRIMINAL COURTS as flawed as they are.. they are not as terrible as FINRA’S KANGAROO COURT, and continued sheltering of the con-men Wall Street fraudsters.. witness dirt balls like E*Trade Oppenheimer Schwab for starters.
    FINRA IS A FARCE !!!!!

    Larry, in spite of all our pleas/efforts it is all falling on deaf ears, and I dont believe there will ever be a resolution, especially in those cases where the closed end funds like Advent Claymore have let the country for islands in the Atlantic to avoid interrogation. The fix and coverup are sealed in cement with payoffs and bribes.

    I expect to die with the pos that E*Trade solicited me to buy.

    No integrity or ethics left in the United States.

  • Mike

    Amerivet provides “Sense on Cents”

  • John W,

    You said that “in spite of all our pleas/efforts it is all falling on deaf ears, and I dont believe there will ever be a resolution”.

    We, as Madoff victims, have often felt the same way. However, that’s all the more reason to keep on fighting for the justice we all deserve.

    It’s people like Larry who keep digging and keep us all informed of what is happening in the financial markets so that we have the knowledge and tools to continue to pursue a rightful solution.

    If we continue to accept the negligence, the lack of transparency and the “good ole boys” club mentality of the regulatory agencies, then we will never find justice. We know the facts and we have the law on our side. I encourage us all to keep on track and to stay vocal.

    I believe somewhere, somehow, someday we WILL prevail.

    Ronnie Sue Ambrosino
    Madoff Victims Coalition

    • John W

      Thanks for the moral support on the Auction Rate on-going fraud… E*Trade has all but destroyed my life in this scandal.. the past 2 1/2 years, they are pure intransigent evil unethical immoral unrepentant bacterial sludge scum off the bottom of a septic tank! in my opinion

      They should be shut down, they and Schwab & Oppenheimer have been some of the most unworthy mafioso’esk organizations to float down that slime infested river that is called Wall Street. Mother FINRA must love her pups however, as she shelters the poor little things.

      You would have better luck trying to cap that Gulf oil spill with one hand than getting even a nonogram of consideration out of E*Trade.
      I would have had a better chance of surviving as an oil covered pelican than having to fight them. AVOID them like a plague, again just my personal opinion..

  • Bill

    I said a couple years ago this country is metamorphosing into a kletocracy. Just look at how the hooligans in DC are operating.

  • Bill


    • John W


      Kleptocracy, alternatively cleptocracy or kleptarchy, from Greek: κλέπτης (thieve) and κράτος (rule), is a term applied to a government that takes advantage of governmental corruption to extend the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service. The term means “rule by thieves”. Not an “official” form of government (such as democracy, republic, monarchy, theocracy) the term is a pejorative for governments perceived to have a particularly severe and systemic problem with the selfish misappropriation of public funds by those in power.

    • John W

      The Financial Industry Regulatory Authority (FINRA), is the “non governmental” regulator for U.S. securities firms. FINRA runs the mandatory arbitration system for the resolution of all disputes between brokers and their clients. Many believe (and I am one of them) this process is biased and rigged against investors.

      FINRA’s Board of Governors is a who’s who of the securities industry. Prudential, Merrill Lynch, Pershing and other industry insiders are well represented. They “govern” their fellow brokers the same way the SEC “governed” Bernie Madoff.

      FINRA’s kangaroo court is currently processing cases brought by investors who purchased auction rate securities. These investors were told ARS were “as good as cash.” It turns out the markets were rigged (much like FINRA’s arbitrations) by the market makers, who made huge underwriting profits packaging and selling these “investment” products. The ARS markets froze in February, 2008 leaving investors holding more than $100 billion.

      We now learn that FINRA itself bought more that $860 million of ARS. Unlike investors who are stuck with these bonds, FINRA dumped all its holdings less than six months before the market for them froze up.

      What remarkable foresight!

      FINRA is the ultimate insider. Is it really possible it did not know the market for ARS was in deep trouble when it got rid of its ARS?

      In October, 2007, Mary Schapiro, formerly the head of FINRA, gave a speech in which she said that “individuals bought auction-rate securities even as institutional investors were dumping their shares.” Shapiro posed “the question” as follows: “Was that information freely shared with individual investors?”

      At the time, FINRA’s own sale of its ARS was not publicly disclosed.

      Ultimately, it will fall to the SEC to investigate the propriety of FINRA’s conduct. That could present a problem. Mary Schapiro is now the head of the SEC. How vigorously will she investigate her own behavior?

      In the meantime, gullible investors will proceed with their FINRA arbitrations, clinging to the false hope of a fair hearing.

      And pigs will fly!

      The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.

      The Financial Industry Regulatory Authority (FINRA), is the “non governmental” regulator for U.S. securities firms. FINRA runs the mandatory arbitration system for the resolution of all disputes bet… The Financial Industry Regulatory Authority (FINRA), is the “non governmental” regulator for U.S. securities firms. FINRA runs the mandatory arbitration system for the resolution of all disputes bet…
      Related News On Huffington Post: Don Solin , wriiten last year, worth repeating since the corruption still lives on at the Farce on the River FINRA

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