Wednesday, November 23, 2016

FINRA Seeks More Power For Bogus Reasons

 While FINRA's desire to be able to react to market manipulation in an expedited fashion is a laudable goal, we must be careful about giving FINRA too much power. FINRA is not a government regulator - it is a private organization whose executives make millions of dollars a year, is funded by the industry, and has the ability to crush the smaller broker-dealers.

As with most private corporations, FINRA seeks to expand its power and reach whenever it can. Remember its attempt to regulate Investment Advisers? Its attempt to obtain and store every investor's private investment data? We need to be careful.

FINRA claims that it needs the ability to crack down more quickly on manipulative trading practices in the securities markets and is allegedly concerned that it has no quick means to stop disruptive trading activity after it has been identified without resorting to proceedings that can take years to complete,

This is simply nonsense. Putting aside the fact that the entire controversy is apparently based on a limited number of claims of "spoofing" and "layering" FINRA routinely refers cases to the SEC, and the SEC has the ability to immediately issue a temporary cease and desist order. So does every State regulator. It also claims that since it does not have jurisdiction over foreign entities it needs to have the ability to issue expedited cease and desist orders. What? FINRA only has jurisidction of those who are registered with it, and a cease and desist order by FINRA, directed at someone who it does not have jurisdiction over, is not enforceable.

There is simply no need to give FINRA the ability to file expedited proceedings where it can impact the operations of innocent firms and brokers, without any evidence of wrongful conduct, and without constitutional protections that apply when the SEC or the States take the same action


FINRA moves to speed up market manipulation crackdowns | Reuters:
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