The Blog Of The Securities Industry Professional Association


Board Selections indicate Status Quo or Cover-up?

FINRA announced its nominees for the Board of Governors and at first glance you would think it was still 2006. The FINRA board is very powerful and controls each aspect of the Self Regulatory Organization. They have the ability to hire and fire FINRA staff, Give pay raises, enact new rules and over turn existing ones. One would think that in light of the financial meltdown as well as the Financial Reform being proposed by Congress that FINRA would seek to reform or maybe even change its current Board and get new blood in the system…But no, not FINRA. FINRA re nominated the existing Head Governor as well as numerous other existing board members to new terms. This makes sense only if there is a bigger picture which fools like me often overlook.

Most of these current nominees were part of a board that failed to look at the risk that was accumulating at the largest firms on Wall Street. They failed to conduct a thorough probe into how the organization they Govern could allow Madoff and Sanford Williams to operate as Ponzi schemes. They failed to offer an explanation as to why they would give an outgoing CEO tens of millions of dollars for about 2 years worth of work. They also have been facing multiple lawsuits from disenfranchised members…yet almost the entire board is staying in place? Am I missing something here? The lone fresh blood they are offering is long time FINRA supporter Lisa Roth of the NAIBD. In her role as Chairwoman of NAIBD Ms. Roth was one of the most ardent supporters of the NASD/NYSE merger. She was such a staunch supporter of anything and everything FINRA that in the Board of Governors meeting minutes PRIOR to passing the merger it was noted that her group had already signed on in support of the merger. Amazingly, before a proxy statement was created and distributed, Ms. Roth and the NAIBD supported it 100%. Today there are lawsuits outstanding against the Board for this and other acts , including the loss of over 500 million dollars under the boards investment direction in 2008. Could it be that FINRA is trying to circle the wagons and get only trusted soldiers onto the board so they can more effectively deflect investigations and inquiries into their ways? Although I am no conspiracy theorist, I do have to question why the entire board is being retained and the only ‘new’ blood being nominated is their biggest cheerleader? Let’s recap the accomplishments of the first FINRA board:

1) Largest financial crisis in almost a century

2) A fake proxy statement that lied to members about IRS opinion letters

3) Ponzi schemes up and down the industry undetected

4) A loss of over 500 million of the 1.4 billion member dollars they were to protect

5) Bonus payments in the millions for FINRA staff

6) Multiple lawsuits against FINRA from other countries for falling to detect Madoff and other scams

7) A mysterious payment between 10- 20 million to out going CEO

8) 3 of the 5 largest Broker Dealers went bankrupt under them.

9) FINRA board nor its employees were even consulted by the Fed in the late night sales of Bear Stearns, Merrill and others.

And for these accomplishments, they want to retain the Board exactly as it was?

I don’t claim to be a genius but the math here doesn’t add up. Any other company with the above results over a 3 year period would have been dismissed not rewarded. Treasury Secretary once threatened Bank America that he would have their ‘incompetent board removed” if thy didn’t go through with the Merrill Lynch deal…Perhaps the Treasury to take a good long look at the list of accomplishment the FINRA board has under its belt?

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May 7th, 2010


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