Thursday, December 6, 2007

FINRA - Investor Advocate?

Has anyone noticed the new FINRA advertising campaign - "FINRA - a not for profit resource with nothing for sale" is the tagline. They are doing television ads, radio spots, even sponsored pay per click links on web pages.

The links go to the Investor information section of FINRA's web site, and the opening paragraph claims that FINRA's job "is to protect investors every day by keeping the country’s capital markets fair. As a not-for-profit financial resource, FINRA offers unbiased information on a full range of issues that affect your money and investments."

If one of my clients made that type of misrepresentation, FINRA would be all over them. Sure, FINRA is a not-for-profit organization, but what does that mean? It means nothing to investors, the public, the markets, or to anyone other than the IRS, so touting that is a bit misleading.

FINRA'S "job" is not to protect investors. That may be a benefit of its "job" but its "job" is to regulate the securities industry. FINRA is not an investor advocate, it is an SRO, a -self-regulatory organization.

There are other questions that arise, like why is FINRA spending its members' money on advertising campaigns, but the real problem here is the identity crisis at FINRA. FINRA is a membership organization turned regulator, and it needs to keep its mission in sight, and its role in mind. Fabricating a new role, as an investor advocate, can cause nothing but problems for it, its members, the markets and ultimately consumers.

We have already witnessed the animosity towards the industry in the past several years in the arbitration area, as rule change after rule change tips the scales more and more in favor of the investor.

And we have seen it in public comments by FINRA management. At a recent conference I attended a FINRA executive actually said that when she joined FINRA she was surprised at how many criminals were in the membership. Her word; criminals.

A significant portion of FINRA Staff does in fact treat firms and individuals as if they are criminals, and such treatment can only get worse if management thinks the industry is full of criminals, and if FINRA thinks it is an investor advocate.

What next, guest speaking at PIABA meetings? Oh wait, FINRA already does that.
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