The Blog Of The Securities Industry Professional Association

The Establishment and Trump

FINRA and the Small Firm Advisory Board

Recently Chip Jones of FINRA made a podcast with Wendy Lanton who is head of the Small Firm Advisory Committee. Please click here to watch this interview

For years now mass media, political pundits and people on the left and right scratch their head and cannot figure out how in the world Donald J. Trump took on the establishment and won. The establishment across the country is going bat spit crazy because they thought they said all the right things. During the primaries, republicans like Jeb Bush and Marco Rubio scoffed at the idea of a wall on our southern border, but promised voters that “for sure this time we will get tough on illegal immigration”. Then Trump called for tariffs on China and breaking all trade agreements unless America benefited and all the Washington insiders like Lindsay Graham scoffed at that notion too because they wanted us to trust them on this false narrative of free trade. Sure, it hurt American manufacturing but the lobbying groups sure paid well.

When Trump went against Hillary, Americans were once again told that the economy is thriving, the Iran deal was great and everyone should get equal pay and free health care, a living wage and possibly free tattoos. The same old lines about equality of pay, woman’s rights, African American rights, Harvey Weinstein’s rights were all bandied about because that is what the left and right have taken turns dolling out for 50 years. Along comes Trump who blows all these tried and true canned lines to the curb and calls everybody a liar with a special interest and proves this by showing that EVERY person running for office on the republican side took money from him and Hillary herself took over $250,000 from Trump. Each and every one of them is ‘fighting for the little guy” or “Working hard so a single mother of 14 doesn’t have to work 4 jobs” and of courseMaking sure your water in Flint Michigan is safe”. The problem is that when you ask them for specifics, you are usually told that there are a lot of negotiations in the background going on but I am fighting for you! And then ‘Born in the USA’ is blared on the speakers, everybody cheers and nothing changes.

This sort of canned line of intents is very similar to what FINRA and the Small Firm Advisory Board (SFAC) has been dolling out for 10 years now. I want to preface this by saying; I know and like Chip Jones of FINRA. He is a very nice young man (compared to an old guy like) and the head of the SFAC, Wendy Lanton of Lantern Securities, seems very intelligent and has good intentions and I mean no disrespect to her or Chip. However, I have seen this movie for over a decade now and I think it’s time to stop with the same song and dance that we described above. We are told how important the SFAC is and how they put so much influence into the Board of Directors rule making decisions, yet here we are 10 years later after the formation of FINRA and we have new rule after new rule that are to the detriment of small firms and brokers. Last month we brought to light the new mandatory COO rule as well as the potential to do away with the 2 principal waiver. Where was the SFAC on this? Well let’s just say their advice to the board is about as meaningful as my advice to the New York Knicks on draft night.

All the same canned lines come into play and we are always hearing how “a rule would have been worse if not for our work.” In addition Ms. Lanton mentions in the pod cast that the SFAC is NOT GETTING PAID. Well why the hell not? Why not demand that you be compensated like Board Members (approximately $60,000 per year) or the NAC (approximately $45,000 per year). How can you be taken seriously by a sitting group of boards if you are not getting paid? Basically, you are admitting that they are the elitist Washington insiders and you are nothing more than the minions of middle class workers looking to have a seat at the table. So with this scathing criticism in mind we do have some suggestions for the SFAC: Step outside the tea and biscuits and be aggressive and blunt like Trump was!

Demand at least an annual stipend of $25, 0000: If you are spending this much time as you say, you should be compensated. Heck the enclosed podcast you made probably cost FINRA members $50,000. Small firms would rather pay you than some professor from Harvard $60,000 to fight for them.

Set up a SFAC disciplinary board: Small firm complaints can be referred to the actual SFAC board for discussion and placed on an agenda, not on a phone call, for the next Board meeting. Phone calls are worthless, but having a board and an examiner forced to discuss it at the next meeting is different.

SFAC oversight on all decisions: When FINRA fines or disciplines a small firm, you should be able to review it, talk to the NAC and or FINRA staff and possibly have reductions like the NAC does. Perhaps you should be able to write up a dissent to the NAC on why a broker dealer should not be barred based on your findings as a group or reduce an egregious fine.

Unanimous vote should trigger a delay: A delay for all rules if a unanimous vote by the SFAC against a proposed rule that will impact small firms or brokers, FINRA will post your dissent, delay sending it to the SEC and allow 120 additional days of open discussion and further feedback. This could have a huge affect on the way the SEC views a potential rule, especially if congressmen in certain districts become aware of this.

Stop making friends: Year after year for over a decade now, we have heard the same old song and dance about opening channels of communications, dialog and camaraderie while children sing Kumbaya holding hands in the back ground. Love or hate Trump, he has gotten his agenda passed for his constituents because he was not in Washington to make friends. He knows they hate him and he doesn’t waste time with olive branches that will be rebuked. Make your agenda and go for it unabashedly and don’t be afraid to muddy the waters. This entire friendly dialog has resulted in what over the last decade? Let’s see:
1) Increase in fees for members
2) Members are charged for expanding business lines or selling their firm
3) PCAOB audit burden has sky rocketed
4) Never ending audits in which 6 months later you don’t know results
5) 1000 few member firms despite the market quadrupling since 2007
6) COO requirement for all firms
7) Egregious 8210 requests
8) A loss of nearly 800 million of the members money from poor investments

It is time to think outside the box and realize, you are not wanted by the establishment and the only way to gain power is to take it back for your constituents

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September 18th, 2018



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