The first annual meeting of the new Financial Industry Regulatory Authority's (FINRA) 23-member board is slated for October 26, 2007, and the regulator recently announced its official slate of seven nominees for its elective seats.
Anyone seeking to run against the seven FINRA nominees will need to submit sufficient petitions to be qualified as contested candidates by September 17. Since 1998, when dissident candidates beat out NASD nominees for the first time, these annual elections have been anything but ho hum. Last year, candidates sponsored by the Financial Industry Association (FIA) pulled off dramatic victories at the District, National Adjudicatory Council and board levels. This year promises to be another slugfest.
You may well be bombarded with requests to sign nominating petitions. After the nominees are certified, you will then need to decide for whom to vote. Some of you may simply vote a party line — be that FINRA's, FIA's or some other group's. But far too many of you will toss the ballots into the garbage having concluded that your vote doesn't matter.
That would be a mistake.
If the past decade of contested elections has shown nothing else, it has demonstrated that you don't have to be satisfied with whatever nominees the regulatory organization proposes. You have a choice, and the folks you elect can stand up to unreasonable regulators, and insist upon sensible rulemaking.
I have assembled a punch list of regulatory items that you should use when deciding to whom you'll give your vote. Sure, a lot of the items on the list are the same old complaints we've all had for years — but isn't that part of the problem? Isn't it time to demand that FINRA finally do something to reform its unfair and unreasonable policies and procedures? To the extent that it's a brand new SRO with a brand new board, let's start things off on a better foot.
Here are four issues that all candidates (from FINRA or otherwise) should address if they are sincere in wanting to help our industry:
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As of the close of business on August 2, 2007, FINRA had 4,655 “small firm” voting members, 224 “mid-size firm” voting members and 193 “large firm” voting members. Among the seven board seats open for election, three are for small firms, one for mid-sized and three for large firms.
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Is it fair for 4,655 member firms to be limited to the same number of elective board seats as 193 firms?
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If elected, will you support a petition to return to the former “one-firm-one-vote” policy?
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If you support the present board composition, why do you think it is fair?
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Processing new member applications, and requests for modification of existing membership agreements (notably to acquire additional branches or to add staffing) still takes FINRA far too long.
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Will you support efforts to demand more aggressive time frames for completion of such applications?
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FINRA members complain about unreasonable regulatory policies and practices during examinations and investigations. In particular, the complaint focuses on (what seem like arbitrary) staff decisions involving the scheduling of on-the-record interviews (the time, duration and place). There are similar grievances concerning the deadlines for, and scope of, document production.
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Will you support efforts to codify fair, and reasonable policies and procedures to be used during examinations and investigations?
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Will you support the creation of an independent magistrate — not a staff member — to rule on such disputes?
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As demonstrated in numerous decisions on appeal within FINRA, and subsequently to the SEC and federal courts, the regulator's initial demands for settlement of violations often exceed the fines/suspensions imposed at the hearing level or on appeal. Many respondents complain that the staff routinely high-ball settlement demands in a tactical attempt to pressure unfair resolutions.
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Would you support reforming FINRA's enforcement protocol by requiring staff to announce at the beginning of all hearings its final offer of settlement, and imposing a full set-off for incurred reasonable legal/forum fees?
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Would you support a rule that would allow a prevailing respondent to seek compensation from FINRA for all reasonable fees and costs in the event that a panel determines that there was no reasonable basis for the filing of charges?
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Get some answers to these questions, think and then vote.
Writer's BIO: Bill Singer practices law at Stark &Stark, and is the publisher of RRBDLAW.com
