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The 4 Reasons Wall Street Cannot Be Trusted

Posted by Larry Doyle on June 20, 2012 6:47 AM |

What are some of the great failures and subsequent lessons America has learned about Wall Street since the outset of our economic crisis 5 years ago?

Well, we have witnessed more failures and learned more lessons than I have space here to highlight. The failures and lessons actually go back a lot further than this crisis.

Regrettably, the industry titans running Wall Street and their crony capitalist partners lining their pockets in Washington have shown little to no inclination to address what Sense on Cents believes are the greatest failures and lessons.

Dodd-Frank? Nope, that doesn’t do it. Consumer Financial Protection Bureau, perhaps? Nope, not there either. See, the fix is still in on Wall Street and far too many in America are not aware of the regulatory sting being perpetrated on investors each and every day. 

What is the essence of this sting and why is it that America neither trusts Wall Street nor Washington? It is called self-regulation and in regard to Wall Street, it is called FINRA (Financial Industry Regulatory Authority), Wall Street’s SRO (self-regulatory organization).

Let’s get very specific. What are the 4 reasons embedded within the organization known as FINRA that precludes America from trusting Wall Street? Why should you be concerned even more today about these shortcomings? For the very simple reason that FINRA, supported by their crony capitalist bedmates in Washington, are looking to increase their regulatory footprint.

Take the mere 90 seconds to view this clip from the Project on Government Oversight and you will understand why I have railed so long and so hard on this Wall Street SRO.

Are you dumbfounded? How is it that an industry funded, self-regulatory organization is not required to comply publicly with the following:

1. Freedom of Information Act
2. Open books and open meetings
3. Cost-benefit analysis for rules and regulations
4. Ethics Rules designed to address conflicts of interest

Many in Washington are now pushing to have FINRA oversee the investment advisory industry. I STRONGLY believe this would be a horrendous development. FINRA and Wall Street have failed egregiously to protect investors. Washington now wants to reward this organization by having them oversee investment advisors. What is wrong with that picture? A lot.

Let’s start the conversation on FINRA by having them comply with the 4 points highlighted above. Then, and only then, might America start to regain a measure of trust in our financial system.

I strongly encourage you to contact your Congressman and compel him/her to reject the Investment Advisory Oversight Act (H.R. 4624). Use this link to reach your representative.

As always, be very careful, and . . . navigate accordingly.

Given the importance of this topic, I would ask you to share this commentary with your friends and colleagues via social media or any other means. Thanks.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Andrew

    LD, thanks for again puting FINRA in your crosshairs. This outfit is better suited for the Russians. What other American organization allows itself to be investigator, judge and jury? If the CEOs of the major brokerage firms had any honor, they’d all quit their BDs on the same day. What would FINRA do then?

  • Michael Smallberg

    Thanks, Larry.

    We’ve learned so much about FINRA from your work over the years – keep it up!

    Michael Smallberg
    Project on Government Oversight

  • Rob

    Larry: Sent the following to Nydia Velasquez:

    I urge you to vote against imposing FINRA as the regulator of investment advisors. Washington has already systemically supplied Wall Street with regulatory licenses to steal that has made it hard enough for investment advisors to find honestly regulated and managed places in which to invest the funds of clients, including state, local and public-sector employee pension funds.

    I am a trustee of a good-sized private foundation that makes contributions to a wide range of NYC institutions, from famous museums to the arts programs of woefully (I should say “criminally”) underserved schools and school districts.

    I know whereof I weep.

  • That is ridiculous! This country has apparently learned nothing from the crisis. Nothing good, that is.

  • Peter S.

    Spot on Mr. Smallberg

  • When elites are held in check, typically by effective legal mechanisms, everyone else in society does much better and sustained economic growth becomes possible. But powerful people – kings, barons, industrialists, bankers – work long and hard to relax the constraints on their actions. And when they succeed, the effects are not just redistribution toward themselves but also an undermining of economic growth and often a tearing at the fabric of society.

    Please sign the petition to the U.S. Senate Banking and House Financial Services Committee asking for improved oversight of federal banking and market regulators.

    To read more about what we’re trying to do and to sign the petition, click here:
    http://www.change.org/petitions/u-s-senate-banking-and-u-s-house-financial-services-committees-use-technology-to-provide-oversight-of-u-s-banking-and-market-regulators?share_id=HTpDoOQNJgpe=d2e

    It’ll just take a minute!

  • Small BD

    How will FINRA recruit enough examiners for handling the IA industry? Many of their examiners who I have had to deal with (forgetting the high turnover rate for the moment) possess a very limited understanding of the rules that they jam down the throats of small member firms.

    This is a moot point, however. Expanded jurisdiction will likely be considered based upon your concept of “crony capitalists.”

    Regardless of the number of books, articles depicting outrageous breaches, or the politically correct (low) number of high-profile convictions we witness, real change will never occur because the rules and regulatory climate in use today have been designed by criminals. As possible proof, observe how many decades the present crisis took to develop and how it has failed to resolve.

    The above comments are a reflection of my personal opinions only, and none should be taken as to imply assertions of fact.

    • Andrew

      Agreed. I quit my BD to escape the oppressive scrutiny.

  • Peter Sivere

    Kudos to Larry and Michael. Thank you both.

  • Bill

    Maybe this is a little off topic, but again Bernanke announces more free geetus for the Wall St. Titans. Was a piece in the wsj other day about how a lot of this free money is not being lent to businesses and individuals because of recession (wall street induced) credit issues. Consequently it flows to the architects of the mess.

  • Rick Johnson

    I concur. What this is really all about is money. FINRA registered representatives are leaving the wirehouses in droves and this means less revenue for FINRA. So, in order to gain back their lost revenue, they are pulling this power play in Washington to try and get control of everybody. If they succeed, then they will have recouped all their registered representatives who left them, plus gain Investment Adviser Representatives to boot. Money is the reason.

  • Brewster

    Larry,

    Please don’t stop railing against FINRA.

    Cronyism is alive and well and trying to lull the sheeple:

    Moody’s Tilts Playing Field Toward Safe Haven Banks

    This is egregious. My family has an old trust account from my grandfather at JPM that we are trying to remove to another safer institution. The family lawyer has just started to be involved.

    We know JPM considers the money to be theirs, just as MF GLobal did. Our trust of JPM is a big fat 0.

  • Mark J. Novitsky

    4 REASONS??? More like 400! Starting with Mary Schapiro & Robert Khuzami / SEC “Selective Enforcement Commission” worse than Chris Cox / Bush. Post-Enron massive intentional loop-hole ridden Sarbanes-Oxley PR stunt (Frank-Dodd =FROD / SOX 2.0), “deferred prosecution agreemnents”, a DOJ who attacks whistleblowers and protects the banksters who created him… Madoff, AIG, FNM, FB, MF Global, JPM, Wachovia, Wash Mutual, Bear Stearns …GOLDMAN SACHS / shareholders just paid out $30,000,000.00 in “DEFENSE COSTS” suing their own (ex) BOD employee Rajat Gupta. In what world could an honest person afford such a legal defense?






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