The Blog Of The Securities Industry Professional Association

FINRA Election Process

Now that the NAC election is over, and the next big election is on the horizon, the Board of Governors, it is probably time to discuss the FINRA election process.

On July 30, 2010, the entire FINRA Board of Governors turns over. This current board was installed as the interim board. All three small firm seats will be coming available. If FINRA continues in their formula, they will somehow select three candidates that they would like to see as governors. Anyone who wants to run against them will have to run as petition candidates which means that they have to register with FINRA and then go about getting 3% of their constituency, or 3% of 4432 small firms to sign petitions in their favor (about 133 petitions). It would be a best practice to get about 150 petitions just in case some are thrown out.

I would have no problem with this if the small firms would actually sign petitions. But it becomes a nightmare trying to get even the 150 signed petitions. Why do you think that is? Can it be that people are actually afraid that if they sign a petition that FINRA will come looking for them? Or that they are so disinterested that they throw the petitions out? Or they have given up and don’t think that they can make a difference. Well, in response to the rule filing for PA and GIA, the SEC got over 2000 comment letters. And they are taking those letters very seriously. So each small firm must make their voice heard.

If you are a member of a trade group, let your organization know that you want them to support a candidate. Tell your BD friends that they have to support a candidate. No one is going to come after you, you won’t have an extra exam, and you won’t be blacklisted from the industry.

However, I don’t believe that the way these elections are run is the best way for the membership, or even for FINRA. I believe that anyone who wants to run should put their request into a nominating committee from the board of governors and they should put as many candidates as qualify on the ballot. Make whatever criteria is necessary, require an interview, fill out a questionnaire, whatever the board decides, but keep the ballot open. In this election, the three people that get the most votes should be the winners of the three small firm board seats. Since a whole new board is being elected, there will be one to sit for one year, one for two years and one for three years. Then the staggered elections will begin the following year. The one with the most votes would be the three year, second the two year, etc.

But that would be too fair. It used to be that FINRA could win elections by doing it this way. At least that’s the way it used to be. But every election for the past 3 or 4 years has had petition candidates and many of them have won their elections. FINRA should realize that the system they are working under can only embarrass them. Their candidates keep losing, like in the recent NAC election. Congratulations to Steve Kohn.

By David Sobel

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October 30th, 2009



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