Government Watchdog Calls for Elimination of FINRA
On February 23, 2010, the Project On Government Oversight sent a letter to Congressional committee members charged with financial oversight urging them not to trust or rely on the Financial Industry Regulatory Authority (FINRA) to police the brokerage industry. See “Watchdog slams Finra’s ‘abysmal’ record,” by Dan Jamieson, published in InvestmentNews.
The Project On Government Oversight (POGO) describes itself as an independent nonprofit organization that investigates and exposes corruption and other misconduct in order to achieve a more effective, accountable, open, and ethical federal government. POGO is perhaps best known for exposing outrageously overpriced military spending on items such as a $7,600 coffee maker and a $436 hammer.
POGO’s letter points out that securities industry Self Regulatory Organizations, in general, and FINRA in particular, have an “incestuous” relationship with the brokerage industry which is fraught with conflicts of interest, that FINRA has failed to prevent all the major brokerage scandals back to the 1980s, that FINRA has failed to regulate member firms at the heart of the financial crisis (Lehman, Bear Stearns, Merrill Lynch), and that FINRA has failed to detect or act upon Ponzi Schemes such as Madoff and Stanford.
With its cozy relationship with its member firms, which finance FINRA, and its “abysmal” track record, Congress should not trust FINRA to protect the investing public, POGO says. “Effective, independent, and efficient government regulation is the only proper way to safely oversee our markets,” POGO added in the letter, echoing the position of the National Association of State Securities Administrators. And that would mean the end of FINRA.
