FINRA Lays Off Senior Enforcement Personnel At The Very Time They Should Be Needed The Most
On January 11, 2010, the Financial Industry Regulatory Authority (FINRA), which is the so-called self-regulatory organization responsible for regulating brokerage firms’ sales practices, laid off five senior enforcement officials, according to a recent Wall Street Journal article by Suzanne Barlyn. They include Katherine Malfa, vice president and chief counsel of enforcement with nearly 20 years of service; Rory Flynn, vice president and chief litigation counsel; Evan Rosser, vice president of strategic planning, and Michael Armelin, an assistant director in the enforcement department, according to the article. The fifth enforcement official, from FINRA's New York office, wasn't identified.
The layoffs reportedly had nothing to do with performance.
While declining to provide details to the WSJ, FINRA apparently issued a statement that it "continues to look at ways to streamline our management structure to be a more efficient, focused regulator." A FINRA spokesperson did say that enforcement staff's headcount and budget would not be reduced, according to the article.
It has been widely reported that FINRA’s financial position has been adversely affected by Wall Street's financial meltdown.
David Paulukaitis, former associate director of FINRA's Atlanta district office, described the departed group as "well regarded … people who truly do have a lot of knowledge and experience and try to do it the right way." "The question is, 'who is replacing them?'" he said.
J. Boyd Page, an investors attorney with Page Perry LLC, added “Why would FINRA fire senior enforcement people at the very time you would expect it to be aggressively prosecuting the many abuses of investors that took place in recent years? The whole situation smells. If the decision was financially motivated, it underscores the inadequacies of self-regulation. If Wall Street can interfere with fraud investigations merely by cutting back on FINRA’s funding, the system doesn’t work.”
At a time when the President and Congress are struggling to reform and invigorate regulation of broker dealers and enforcement of the securities laws, FINRA’s termination of key FINRA enforcement officers serves as a reminder that we cannot rely on government and self-regulation to “keep them honest.” Private enforcement of legal rights through litigation by aggrieved investors and their attorneys, acting as private attorneys general, remains an important aspect of maintaining the integrity of our capital markets . If honest markets are good for America, securities litigation and arbitration are good for America.
