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FINRA Gets New ‘Sheriffs'; Amerivet Proxy Proposals Approved!! Strongly Recommended

Posted by Larry Doyle on August 14, 2010 12:14 PM |

Monday 8-16-10

I am continuing to keep this commentary as my lead post for three reasons:

1. I believe the potential impact of the developments in this story are enormous on the financial regulatory system in our nation.  
2. This story received very little if any coverage outside of some industry newsletters. 
3. Weekend traffic at blogs is considerably less than during the week.    

I truly hope readers can fully appreciate the magnitude of the developments captured within this story. Sense on Cents’ pursuit of truth, transparency, and integrity took a giant step forward with the results of last week’s FINRA Annual Meeting. Have I piqued your interest?  Read on and spread the word!! LD  

Saturday morning in America!!

On this glorious morning on the east coast, I believe all Americans should be heartened by the results of the annual meeting held by Wall Street’s self-regulator, FINRA, this past Thursday. I remain convinced that FINRA as an organization remains an unknown entity to the overwhelming majority of the American populace. The results from this annual meeting may start to change that unfortunate reality. How so? Let’s navigate.

The Securities Industry Professional Association (The SIPA), long a thorn in FINRA’s side, actually trumped the FINRA release in highlighting the results of elections to the FINRA board of governors. Good for John Busacca and his colleagues at the SIPA in sending a strong message to FINRA that there are ‘new sheriffs in town.’ Yesterday the SIPA released,

SIPA Candidates Sweep FINRA Board Elections!

For the first time in FINRA/NASD history an entire slate of petition candidates have been elected to serve on the FINRA board of Governors. Jed Bandes, Joel Blumenschein and Ken Norensberg won in a contested election against hand picked FINRA candidates. The SIPA wants to thank its members who put their time, effort, and reputations on the line in endorsing the slate. We look forward to working with both the regulators and the other candidates in transforming regulation as we know it.

The official results have not been released as of yet by FINRA but its apparent the voice of the small B/D (broker-dealers) was heard loud and clear.

Once again the members of the SIPA are proud to have supported and voted for Bandes, Blumenschein, and Norensberg and ask that they commit to upholding the change they vowed to bring.

Creating real change within longstanding, powerful organizations is never easy. While external pressures applied consistently can create a basis for change, the change truly needs to come from within the organization. Given the travesty that has occurred on Wall Street and throughout America over the last few years, there is no doubt that FINRA needed real change in terms of new governors. For the new board of governors to generate a sense of true investor confidence and real investor protection, they now need to follow through and fully investigate, expose, and rectify past failings incorporated in the proxy proposals put forth by Amerivet Securities.

I am beyond excited that FINRA’s member firms had the courage and fortitude to pass these proposals. I have been informed the votes in favor of these proposals were overwhelming. Make no mistake, FINRA had no interest in seeing these proposals passed. That fact alone shows how out of touch and misaligned FINRA is with its own members and the nation.

My Photo

I commend Lieutenant Colonel Elton Johnson of Amerivet and his attorneys (Jonathan Cuneo, William Anderson, and Richard Greenfield) for their persistence in doggedly pursuing what has really transpired within FINRA. America deserves to learn the real inner workings of Wall Street’s self-regulator.

For those unaware, the proposals were highlighted in my commentary from August 3rd, What Is FINRA Hiding?,

In light of the challenges investors and all American citizens have experienced over the last few years, who in our nation would not fully support the following proposals which were presented to FINRA members in the following format for its upcoming annual meeting:

Proposal 2: FINRA should be required to disclose in each annual report the compensation for the top ten most highly paid FINRA employees and the amount of any funds paid to compensation consultants;

Proposal 3: There should be an independent study of ties between current/former FINRA directors/officers with Bernard L. Madoff, his family members and any of their affiliates;

Proposal 4
: There should be disclosure of FINRA investment transactions, policies and practices;

Proposal 5
: The Board of Governors meetings should be public, unless absolutely necessary to protect the confidentiality of individual regulatory issues;

Proposal 6
: FINRA members should have a non-binding “say-on-pay” for the five most highly compensated FINRA employees;

Proposal 7
: FINRA should employ an independent private sector inspector general to oversee its performance; and

Proposal 8
: FINRA should disclose (without redaction) all its correspondence with the IRS concerning the $35,000 payment to members in connection with the consolidation of NASD and NYSE Regulation.

Thanks to a friend of Sense on Cents for sharing the results of the voting on these Amerivet sponsored proposals. I strongly encourage anybody who cares about our markets, our economy, and our country to carefully review these figures. The results are nothing short of a first round, pulverizing TKO. Of particular interest is the disparity in voting between large firms which have been widely viewed as benefiting from FINRA’s protection vs the small and medium firms which have felt FINRA’s sting.

Look specifically at the voting on Proposal 8 in which the FINRA payment of $35, 000 to its members firms is contested based on misrepresentation by Mary Schapiro et al in the FINRA proxy statement used for the merger to create FINRA itself. The large firms on Wall Street were the beneficiary of FINRA’s underpayment (to the tune of $175-350 million) to smaller firms because the large firms’ annual dues to FINRA went down.

These developments within FINRA can not be viewed as an end to the fight for real transparency. They are merely “the end of the beginning.”

I have spent more time reading FINRA Annual Reports, legal briefs, and a wide array of assorted other related documents than I ever could have possibly imagined. I often thought that much of my writing of the need for real change and real transparency within this organization would fall upon deaf ears or attract little interest. I was heartened last February when the Project on Government Oversight echoed my feelings and belief of the need for real transparency within FINRA and wrote, POGO Letter to Congress Calling for Increased Oversight of Financial Self-Regulators. February 23rd, the date that letter was released by POGO, was a great day.

Waking up this morning to the news that FINRA is getting new ‘sheriffs’ and has passed the Amerivet proposals is spectacular. The pursuit of real transparency within FINRA is far from over but today marks a significant move in the right direction.

Mary Schapiro Mary Schapiro, chairman of the Securities and Exchange Commission, testifies before the House Financial Services Committee July 22, 2009 in Washington, DC. The full committee met to hear testimony on "Regulatory Perspectives on the Obama Administration's Financial Regulatory Reform Proposals."

This morning, I wonder how former FINRA and current SEC head Mary Schapiro, her former FINRA colleagues, the crowd on Wall Street, and their cronies in Washington are feeling knowing that with these results from FINRA’s annual meeting, America (that is the smaller broker-dealers representative of the country at large vs the large Wall Street banks) is calling for real transparency within our financial regulatory system?

Democracy at work!! So sweet!!

Wow!! With the rush of adrenaline streaming through my veins, I think I’ll go get myself a workout.

Saturday “morning in America”!! Keep punchin’!!

I love it!!

Comments, questions, constructive criticisms always encouraged and appreciated. If you care, please share this commentary with friends and colleagues!!

LD

Related Sense on Cents Commentary
Sense on Cents/FINRA
Sense on Cents/Mary Schapiro

In the spirit of full disclosure, I have no affiliation or interest in any entity related to FINRA or any of the organizations involved in the pursuits highlighted here. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets, including our regulators, so that real investor confidence and investor protection can be achieved.

Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

  • phil trupp

    This is great good news. Well done. Congratulations to you, Larry, for being in the forefront of this battle. You have created with Sense on Cents a clear and articulate voice for those inside the financial industry. Even more important, your efforts are helping provide much-needed education to a general public which is too often confused and victimized by economic double-speak. As a former amatuer boxer and club fighter, I echo you call to “keep punchin’!”

  • Mike Barry

    maybe these new finra leaders can crack down on Oppenheimer & Co over their refusal to redeem auction rates. Why won’t they? Their competition did the right thing.

    If you’re thinking of opening an Oppenheimer & Co account on Monday – don’t. They don’t care about their clients. You’ll lose your money.

  • Disgruntled BD

    As a small broker/dealer, we have often abstained from voting because of ‘rumors’ we heard about retaliatory audits on the one hand, and having no desire to support a FINRA nominee on the other. However, since “change” won’t come from ‘above’, we simply had to support Lieutenant Colonel Elton Johnson’s proposals, along with the petition candidates. Things have gotten so bad in the securities industry that we need to send in the army! Thank you Mr. Johnson for fighting for freedom at home and abroad.

  • http://www.thesipa.com john busacca

    Larry is truly a trail blazer!!! Thank you for keeping the faith for all of us!!

  • John W

    Thank you all, now they need to order FINRA to mandate all these crooked brokers, like Schwab. ETrade, Oppenheimer et al who sold Auction Rates to REDEEM NOW, or yank their BD licenses!!

  • disenchanted

    I am thrilled with the results. Now lets see what ablility these three have in a board of 21 people. I know that one of the winners is very verbal and is not intimidated by power. I hope he is able to be influential in his new seat. It is important that the small BD population work with this new group, vote with them when asked, and keep abreast of what is going on. I would like to see all the Colonel’s propasals come to fruition and I hope this new group can make the issues public going forward. I wish this group success in thier endevors, as their success is our success, and the public investors success.

  • http://www.thesipa.com john busacca

    This is why we chose to run these three candidates because they are all smart, outspoken and actually get it…we look forward to working with them to change things

  • Lou

    Outstanding!!!

  • fred

    LD,

    I fully support your organizational altruism; truth, transparency and integrity. I also believe that all persons and organizations act in their own self interest.

    It would seem the election of the new members to the board does represent a positive development, big vs. small, however, what still appears to be lacking are the “checks and balances” that true “opposing interest” representation would provide.

    Our shared belief in organizational atruism demands more diversity, the inclusion of investor representation on the board.

    Do the by-laws of FINRA, a self regulating entity, specifically prohibit representation by interested parties? If not, American Association of Individual Investors, are you listening?

  • disenchanted

    Finra has at least a dozen people on the Board that are NOT members of the industry. The big issue is that they are picked by Finra, not by election. That should also change.






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