Advisers want Finra to focus on the 'bad guys' and leave the rest alone

New CEO likely to get an earful as he embarks on a 'listening tour'

Oct 6, 2016 @ 1:09 pm

By Mark Schoeff Jr.

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If given the chance to talk to the new Finra chief Robert W. Cook, financial advisers would tell him that the broker-dealer regulator should streamline its rules and focus on the worst malfeasance in the industry.

Phillip Cook, owner of Mogul Wealth Management, said he and his clients are suffocating under Finra rules that he said have caused a proliferation of documents related to everything from opening accounts to conducting rollovers.

“If you stop us from doing business because of your bureaucratic overreach, you won't have anyone to regulate anymore,” Mr. Cook said.

Mr. Cook, who is not related to Robert Cook, said making the Finra rulebook bigger won't protect clients.

“Another rule isn't going to stop Bernie Madoff,” Mr. Cook said. “You're dumbing us down to the lowest common denominator. You're treating us like everyone's a crook.”

Perhaps the dually registered adviser will be able to give his suggestions about Finra priorities directly to Mr. Cook, who was appointed president and chief executive of the Financial Industry Regulatory Authority Inc. in August.

Mr. Cook, a former director of the Securities and Exchange Commission's Division of Trading and Markets, recently announced he is launching a “listening tour” to talk to “investors, regulators, policymakers, a cross-section of member firms and industry organizations” to help him set the Finra agenda.

Jon Ten Haagen, founder of Ten Haagen Wealth Management, also said Finra should be more focused on enforcement.

“He should find out who he really wants to go after,” Mr. Ten Haagen said. “Go after the bad guys.”

Another way Finra could help investors is by strengthening adviser credentials, according to Allan Katz, president of Comprehensive Wealth Management Group.

The regulator could start by reducing the number of securities licenses. He is particularly peeved about the Series 6, which allows an adviser to sell only certain investment products.

“The Series 6 shouldn't exist,” Mr. Katz said. “You should be fully licensed or not licensed at all. They should change it so that it's a level playing field, and consumers know what they're getting.”

A former Finra official, Dean Jeske, who left the agency earlier this year, said he is doing his own sort of listening tour as he meets with industry clients.

Mr. Jeske, a partner at Foley & Lardner, said he has heard — and Mr. Cook likely will hear — concerns about the increasing level of Finra fines.

“It's more and more difficult for a firm to resolve a case within the five-figure or low six-figure range as opposed to the high six figures or seven figures,” said Mr. Jeske, a former Finra deputy chief regional enforcement counsel.

Another topic on the minds of brokerages is how Finra will react to a Labor Department rule that raises investment advice standards for retirement accounts. Implementation of the measure, which requires advisers to act in their best interests of their clients, will begin in April.

Former Finra chairman and chief executive Richard Ketchum favored a fiduciary duty rule for brokers but criticized the DOL rule.

“There's going to be discussion of the interplay between the fiduciary rule and Finra's own rules,” Mr. Jeske said.

The DOL rule and Finra's emphasis on enforcement has the brokerage industry feeling “under siege” and worried about its “long-term viability,” said Todd Cipperman, principal at Cipperman Compliance Services.

In this atmosphere, Mr. Cook could offer some reassurance.

“The fundamental question is: Does he see himself as a leader of the brokerage industry or primarily as a regulator?” Mr. Cipperman said. “If he actually listens to concerns and thinks about where brokerage products fit in a retail investor's portfolio, he'll gain a lot of support from the brokerage community.”

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