The Alliance for Economic Stability, Inc. (“AES”), a non-profit economic policy organization whose web site is located at www.eally.org and www.eallies.org, has launched a media campaign called “America Must Know Its Entrepreneurial Regulators,” in response to comments in a Reuters article published April 1, titled “Wall St Watchdog Won’t Roll Over: FINRA CEO.”
Americans go about their daily business unaware of what FINRA is and how it affects their lives. Yet no private or government organization anywhere in the world has FINRA’s troublesome combination of court-granted absolute immunity, wholly unsupervised administrative authority and inherent conflicts-of-interest. This allows dangerous abuse of power without accountability to the government or the public.
The Reuters profile of FINRA’s leader, Richard Ketchum, focuses on FINRA’s insistence on using the crisis to increase its control over the nation’s financial business. FINRA is a billion-dollar-a-year private business that is given government power and that is allowed to use its revenues from regulatory fees as it sees fit, including in self-promotional advertisements, congressional lobbying and multi-million-dollar salaries for its executives, despite being supposedly non-profit. FINRA is free to use its “absolute” powers without any direct congressional or judicial oversight whatsoever and without risk of sanctions or remedial actions by the President or any federal government departments, agencies or commissions.
Ketchum and other FINRA executives are free to earn multi-million-dollar salaries while acting as if they are America’s primary guardian against financial wrong-doers. In fact, FINRA executives are the nation’s greatest beneficiaries of regulatory deficiencies that cause financial crises. FINRA executives are free to be rogue cops without government oversight or any threat of being held personally accountable.
This conflict is illustrated in Reuters “Wall St Watchdog Won’t Roll Over” article where Ketchum is shown to be pursuing authority over the nation’s investment advisors without addressing FINRA’s inherent conflicts of interest, lack of accountability to government, and dismal regulatory performance to date. FINRA’s failures aren’t limited to its failure to detect the Stanford and Madoff Ponzi schemes. FINRA is also directly responsible for failing to detect the AIG, Bear Stearns and Lehman Brothers capital requirement deficiencies.
In December 2009 AES wrote a letter to Congress specifically addressing a legislative amendment to prevent FINRA from gaining jurisdiction over investment advisors and the misconception of FINRA’s jurisdiction and use of its regulatory funding.
In a February 5, 2010 letter to Congress concerning its “Financial Crisis Inquiry Commission” the AES introduced the term “Entrepreneurial Regulator” to describe Ketchum and others at FINRA who have made fortunes far greater than the size of those made by most hard-working American business people that work in competitive markets. Americans must know whose interest Ketchum and his cohorts really service and how they spread around their spoils.
The Alliance for Economic Stability, Inc. has published a report on FINRA titled “Securities Regulatory Reform: Addressing FINRA’s Inherent Conflict and Moral Hazard.” The report and the AES letter to Congress, can be viewed on the AES website.
Disclosure: not applicable