Finra exams boss to leave in March

Robert Errico, Finra’s executive vice president for member regulation, will leave the organization at the end of March.

He was responsible for surveillance and annual examinations of broker-dealer firms.

“Bob has led our examination program through the most challenging period in the history of the organization,” Finra vice chairman Stephen Luparello wrote in a memorandum sent to the staff at the Financial Industry Regulatory Authority Inc last week. “We plan to begin our search to fill his position immediately.”

Mr. Errico will continue to work as a senior adviser to help with the transition.

Finra spokesman Herb Perone confirmed that the memo had been sent out, but declined to comment further.

Mr. Errico wasn’t universally admired among member firms and Finra employees.

When he took over member regulation in 2003 at Finra’s predecessor, NASD, the oversight of broker-dealers “took a turn for the worse,” said Alan Wolper, a former head of Finra’s Atlanta district office and now an attorney at Locke Lord Bissell & Liddell LLP.

Regulators were embarrassed when the research analyst scandal exploded that year, and Finra began focusing more on enforcement and less on helping broker-dealers comply with rules, Mr. Wolper said.

Mr. Errico “was complicit” in that effort, Mr. Wolper said.

“I had a lot of respect for him,” Jed Bandes, president of Mutual Trust Company of America Securities Inc., said about Mr. Errico.

“It’s a thankless position the guy is in,” said Mr. Bandes, who sits on Finra’s Atlanta-based district conduct committee. “All the guys are going to hate him, because no one likes to get examined.”

In 2007, following the formation of Finra through the merger of NASD and the NYSE’s regulatory unit, Mr. Errico’s role was refocused on sales practice compliance. Grace Vogel, who headed member firm regulation at NYSE Regulation, was given responsibility for risk and operational oversight.

During the past year or so, Mr. Errico has warned Finra members against potential compliance lapses in the face of the economic downturn. In a letter about exam priorities to its more than 5,000 broker-dealer members, he and Ms. Vogel warned broker-dealer executives not to neglect “non-income-producing areas of business” and to consider carefully the effect of layoffs or potential layoffs on their ability to uphold standards

“While firms maintain the discretion to determine the adequacy of head count, we recommend that they carefully consider the impact of head count reductions in such areas as compliance, finance and operations, and other control functions,” they wrote.

E-mail Dan Jamieson at [email protected].