The Blog Of The Securities Industry Professional Association

Lacking Trust in FINRA?

Time to throw out the incumbents and start over

Since your reading this we can only assume you don’t believe that FINRA invested YOUR money in AAA rated bonds and T-Bills. Thank you for not drinking the kool aid that has been spewing from FINRA like oil from the gulf. This election for the Board will mean more to your business then you can ever imagine. FINRA and its top executives are not stupid and they know exactly who they can count on when the going gets tough or when they want new rules enacted. Change is sweeping across the country politically and for the first time in generations people are demanding accountability. Its time that you as a small firm owner demanded the same from your organization. In the past 4 years Wall Street has melted down under our very eyes while FINRA concentrated on fining one man firms for AML violations. Over 100 Million dollars of YOUR money was paid out to the top executives of FINRA over the last four years, yet this organization told you that the IRS would only allow a payment of $35,000 to you. While you are fighting for survival, the compensation paid to these people at FINRA has swelled to proportions that would make John Thain of Merrill Lynch fame blush. Consider this: John Thain was forced to testify under oath regarding his bonus pay of 10 million dollars, yet at the same exact time the former CEO of FINRA was receiving a parting gift of between 8 and 20 million for two and a half years on the job. FINRA and its board had a fiduciary duty to protect the 1.5 billion nest egg they were sitting on and instead of buying T-bonds or CD’s they invested in ….hedge funds and Auction Rate Securities? That 1.5 billion is now down to 900 million and with the way they are spending, it will continue to dwindle. If you invested your clients money this irresponsibly two things would happen: You would be sued for losing 1/3rd of the trust and FINRA would probably throw you out of the industry. Despite a list a mile long of failures, FINRA trots out candidates who have a history of doing what they are told. For instance, When then NASD pushed this hasty merger down the members throats they counted on two trade groups to seduce the small firms into giving up their voting rights in exchange for a measly $35,000. NAIBD which was headed by FINRA candidate Lisa Roth and FSI, which FINRA candidate Mari Buechner is one of its main leaders. These two trade groups in fact were counted on for support prior to the announcement. In fact, The FSI actually endorsed the merger publicly PRIOR to reviewing the offering material

We all know the offering memorandum was a bunch of lies and that FINRA lied to its members about how much could be paid yet FINRA is out to reward its loyal foot soldiers again with seats on a very powerful board. How can Ms. Buechner possibly confront and or challenge FINRA staff when she and her organization endorsed a huge merger without even having the benefit of the material? Do you really think she will take the time to evaluate the implications of various new rule proposals or will she continue to rubber stamp the FINRA agenda at your expense? Likewise for Ms. Lisa Roth who was a champion for the ill fated merger that has destroyed the industry. In her own words, Ms. Roth rubber stamped the NASD vote to take away your rights and didn’t even demand like we did that the IRS opinion letter be made public to all members. There was no demand for transparency or disclosures, just an eagerness to please NASD staff and to get in line for her appointment to the board. Here is the actual letter that was sent out to all members from Ms. Roth.

Lastly, Don Steele is a nice gentleman who has proven time and again that he cannot win on his own. In fact in 2007 he went against your petition candidate and lost yet FINRA continues to put him up year after year for a board seat. Why is that? Even Al Gore knew that when you lose an election you may want to take some time off, yet he continues to run year after year. I guess he may not be getting the members message. Unfortunately Howard Spindell is also failing to get the message sent by the members. Year after year, Position after position Mr. Spindell runs and quite frankly a vote for Howie is a vote for FINRA because it splits the vote. Mr. Spindell should complete his obligation on the small firm advisory board before he jumps into yet another race. Interestingly, Mr. Spindell could complete his term on the SFAB and run next year but has chosen once again to split the dissident vote. For this reason alone his motives must be questioned and voters should send a strong message to him that when he runs for an office it is to do a job not use it as a spring board to run year after year for other positions.

Its time for a total house cleaning and I would urge votes to stop the bleeding and ‘throw the lot out”. Isn’t it time for fresh blood that can actually bring open discussion based on experience? The rubber stamp approach does not and cannot work. These candidates who talk about working ‘constructively’ with FINRA apparently have never studied World War II history. You are in a fight for your Broker Dealer’s life and I would urge you to Vote for Jed Bandes, Joel Blumenschein and Ken Norensberg. At this point what do you have to lose?

You have tried it the FINRA way and 15% of firms have been closed or gone out of business, you lost your share of 600 Million dollars and the public thinks all brokers are scumbags because FINRA has not uncovered one significant scam in 10 years. Think about it: Madoff, Sanford, Mutual Fund after hours, Research scams, accounting scams, Brokerage Failures, the list goes on and on and in each case it was the Feds or the State Attorney Generals uncovering these crimes, not FINRA. They were too busy giving each other huge pay raises and issuing 8210 requests for firms for OATS reporting. Send a message loud and clear and reject FINRA and its candidates and Vote Bandes, Blumenshien and Norensberg. In addition, all three have already voted YES on the proxy resolution to items 2 through 8 and will bring these concerns directly to the board on their first day on the job.

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July 15th, 2010


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