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by Bill Singer Subscribe to RSS Feed: Blog Home | Past Entries FINRA's Unseemly Game of Hide-And-Seek Written: January 26, 2009

By Bill Singer

http://RRBDLaw.com

http://BrokeAndBroker.com

On January 23, 2008, the Financial Industry Regulatory Authority (FINRA) published a seven-paragraph press release entitled FINRA Board of Governors Launches Search to Replace Schapiro; Stephen Luparello to Serve as Interim FINRA CEO at http://www.finra.org/Newsroom/NewsReleases/2009/P117753.  The lead paragraph in the release states:

The Board of Governors of the Financial Industry Regulatory Authority (FINRA) has established a search committee to identify candidates to replace FINRA CEO Mary L. Schapiro, whose nomination to become chairman of the Securities and Exchange Commission (SEC) was approved by the U.S. Senate yesterday.

Okay, so let's be blunt: These haven't been the best of times for Wall Street or its regulators.  And while it's obvious that we need to blame a whole host of bad guys and gals who deceived the investing public and brought discredit on the industry, I have also long pointed an accusing finger at the regulatory establishment for its paternalistic penchant for feigning reasons for unnecessary secrecy with such matters.  We who have been victimized by Wall Street's fraudsters and the ineptitude of its regulators do not need another pat on the head and a gentle push towards the door from FINRA, the Securities and Exchange Commission, or any other regulator.  The days of private conversations between our regulators and the Bernie Madoffs of Wall Street should be over.  The days of unnamed individuals selected by an unexplained process to search for the next CEO of FINRA should similarly be resigned to the grave.

How nice that FINRA has established a "search committee" to identify its next CEO.  Given FINRA's less than sterling regulatory record during the past decade, it certainly could use an effective CEO capable of getting that house in order.  It certainly needs a healer who can mend the rift within the FINRA community that separates larger, influential member firms from their smaller indie/regional competitors. It also needs a respected professional who will clean house of the dead weight, reward veteran staff with overdue promotions, and infuse new blood into an ailing organization. Ultimately, the challenge for any FINRA CEO is to walk a highwire amidst gale force winds.  The next FINRA CEO must understand the industry to be monitored, and such knowledge does not come from textbooks or the classroom or from a career solely as a regulator or academic.  On the other hand, that same CEO must often turn a blind eye and deaf ear to the whining from Wall Street--always mindful to discern between legitimate gripes of member firms and their employees, and the merely reflex-like pushback against regulation that will always (and naturally) emerge from any regulated industry.  Unequivocally, the first obligation of FINRA's CEO is to protect the public from the misconduct of the industry, and to protect the industry from its own folly.  No, not exactly an easy job; which explains why the selection of the next CEO is so critical and can no longer occur in the shadows.

Sadly, FINRA seems stuck in the political gamesmanship of a now outdated and repudiated era.  The public and industry reformers have long demanded more openness from FINRA and those demands have been thwarted and deflected with great skill by those in charge.  That is not praise.

Once again FINRA has established yet another important committee and, once again, somehow, just amazingly, oddly, almost inexplicably, the self-regulator manages to just not publicize the names of the folks on that search committee.  The public and the industry is entitled to know who is on the search committee, who appointed them, and why they (and only they) are qualified to conduct the search. 

And for the record: No one asked me to serve on the search committee.