FINRA CEO calls for 'bold action' on regulatory review, reform
WASHINGTON -- If you're not happy with how FINRA functions, CEO Robert Cook wants to hear from you.
Cook is engaged in a "comprehensive, organization-wide top-to-bottom review" of FINRA's programs and operations. And because Cook is encouraging an aggressive approach, his efforts could result in major changes for the heavily regulated wealth management business.
"Everything must be on the table," Cook told attendees at FINRA's annual conference. "We have to avoid incrementalism or convenient compromises when bold action is required. This may not always be comfortable. While our changes must have a clear purpose and be workable in implementation, we cannot shy away from ambitious initiatives that will help us better achieve our mission."
After taking over as head of the regulator in August, Cook began what he calls a "listening tour" to meet with broker-dealers and other stakeholders, and has since launched FINRA360, a formal, multi-year review initiative to reassess FINRA's regulatory operations, its use of data and technology, and the metrics the regulator uses to evaluate its success.
In response to feedback from the industry, the regulator is currently evaluating whether to combine the distinct enforcement units in its member regulation and market regulation groups.
And as part of its broader review, FINRA is exploring new ways to better communicate with broker-dealer firms in a bid to facilitate compliance. In the enforcement component of that program, Cook said FINRA is committing "to take a fresh look at what we do today and to provide greater transparency and guidance."
This week, FINRA announced its Compliance Calendar, a tool to help brokers keep track of upcoming filing deadlines and other compliance requirements. And later this year, Cook said that FINRA will distribute guidance summarizing the key exam findings from FINRA's various programs, "enabling you to use this information to strengthen your own control environment and address any potential deficiencies before your next exam."
Taken together with the regulatory guidance that FINRA publishes, the FINRA360 initiative is aimed at "finding better ways to help firms comply with the rules," with a particular focus on smaller brokerage shops.
"There are clearly concerns that many small firms have about compliance," Cook said. "We have to look at what is it about our rules that may impede small business."
TOO MANY REGULATIONS?
Cook is also pledging to ramp up FINRA's retrospective rule review, where the regulator combs through its rule book to reassess whether an existing regulation needs to be updated or scaled back.
Just this week, FINRA began re-evaluating its rules governing outside business activities and private securities transactions.
"Regular rule reviews can help us understand whether those rules can be made more effective and less burdensome, and also identify gaps in areas where investor protections can be strengthened," Cook said.
Separately, Cook also set as a key priority scrutiny of high-risk brokers and efforts to remove bad actors from the industry, an area where FINRA is "devoting considerable resources."
Last week, FINRA advanced a set of proposals aiming to crack down on high-risk brokers, including the potential for increased penalties for firms that hire brokers known to have engaged in past misconduct.
"We share a common goal in this area," Cook said. "And I call on all of you to continue to work constructively with us to put in place whatever measures are required to ensure that investors can have confidence in their investment professionals and that bad actors are removed from the industry."