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“The Lack of Transparency and Accountability at FINRA Is Absurd”

Posted by Larry Doyle on December 10, 2010 6:46 AM |

I detest those people and organizations paying mere lip service to issues needing real transparency and accountability.

I love having the voice provided by Sense on Cents so I can highlight a wide array of these issues and so people can more effectively navigate the economic landscape. I also love being able to ask the hard questions and call out those whom I think are not serving the public interest.

What else do I love? I love when a voice far stronger than my own echoes my thoughts, shares my opinion, and blasts away in pursuit of real truth, transparency, and integrity along our economic landscape.

With only a few exceptions, the media as a whole has shown itself unwilling to truly take the gloves off and go after the aforementioned ‘lip serving’ individuals and institutions. Independent watchdogs in pursuit of good government are far more aggressive.

On this note and against this backdrop, I have to admit my adrenaline picked up yesterday. How so? Let’s navigate as I was informed of the following:

The Project on Government Oversight (POGO) was once again calling out the organization–that is FINRA– that many think has protected Wall Street far more than it has protected investors as it is charged. The last two days POGO put forth the following:

December 9, 2010

The Project On Government Oversight (POGO) is calling on the nation’s largest financial self-regulatory organization to make its Board meetings open to the public.

In a letter sent yesterday to the Chairman and CEO of the Financial Industry Regulatory Authority (FINRA)–a private self-regulatory organization that oversees and is funded by over 4,600 securities brokerage firms–POGO urged FINRA to make itself more open and accountable to its members, investors, and taxpayers.

“The lack of transparency and accountability at FINRA is absurd given its role in regulating brokerage firms,” said POGO Executive Director Danielle Brian.” After the Wall Street collapse we simply can no longer allow the financial industry to regulate itself behind closed doors.”

FINRA’s members recently approved several proposals to reform FINRA, including a proposal to provide transcripts of Board meetings. But FINRA’s Board rejected most of these proposals, and continues to conduct its meetings behind closed doors.

The Dodd-Frank financial reform law requires the Government Accountability Office and Securities and Exchange Commission to consider whether self-regulatory organizations such as FINRA should assist with the oversight of hedge funds and investment advisers. POGO wrote in its letter that it would be “foolhardy” to give an organization such as FINRA more authority without also requiring it to be more transparent and accountable.

Follow the link to view POGO’s FINRA resource page, including POGO’s previous letter to Congress raising concerns about FINRA’s excessive executive compensation, its “incestuous relationship” with the securities industry, and its failure to regulate the misconduct of past members such as Bernie Madoff, Allen Stanford, Bear Stearns, and Lehman Brothers.

I love it. In my opinion, FINRA has continually snubbed its nose at many of its smaller member-firms, investors, and the American public at large when it has come to a host of issues which these constituencies want and deserve to have addressed. What is one of these issues? Well, POGO addresses the concern which I highlighted in my commentary yesterday on Bernie Madoff.

POGO is also concerned by the Board’s wholesale rejection of other proposals approved by FINRA’s members. According to the letter recently sent to FINRA’s members describing the Board’s decision:

The Board is satisfied with a report issued by a special review committee which found no inappropriate connections between FINRA and the Madoff family

I have written extensively on these issues. POGO shares my sentiments and I share POGO’s. Will FINRA respond to POGO’s letter from yesterday? To whom was the letter addressed? Whom was cc’d on that letter? Upon further review, we learn the following:

December 8, 2010

Richard Ketchum
Chairman and Chief Executive Officer
Financial Industry Regulatory Authority
1735 K Street
Washington, DC 20006

Dear Mr. Ketchum:

The Project On Government Oversight (POGO) is writing to urge you to bring more transparency and accountability to the Financial Industry Regulatory Authority (FINRA). As a first step, we call on you to fulfill the mandate from FINRA’s members to make FINRA Board meetings open to the public…..

For those interested in the entire letter, you can access it here.


Danielle Brian
Executive Director

cc:        SEC Chairman Mary Schapiro
House Committee on Oversight and Government Reform
House Committee on Financial Services
Senate Committee on Banking, Housing, and Urban Affairs
Senate Committee on Homeland Security and Governmental Affairs
FINRA Board of Governors
FINRA Members

This is beyond good.


I commend POGO for calling FINRA out and for putting these other individuals, committees, and constituencies on notice. As for Sense on Cents’ calls for greater truth, transparency, and integrity within FINRA and at every other point along our economic landscape, I can assure you, two years in and …..I’m just getting started.

What do you think? Comments, questions, constructive criticisms always encouraged and appreciated.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. 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 so that investor confidence and investor protection can be achieved.

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