Finra set to invest more in examiner training, provide more clarity on enforcement choices

CEO Robert Cook responds to concerns he's hearing during listening tour, Finra360 initiative

May 17, 2017 @ 1:14 pm

By Mark Schoeff Jr.

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Finra president and chief executive Robert W. Cook said on Wednesday that the broker-dealer self-regulator will upgrade training for examiners and provide member firms more clarity on the organization's enforcement decisions.

Those are two of the results so far of Mr. Cook's effort to review Finra's operations and policies "with fresh eyes." He took the helm of Finra last August and has been conducting a "listening tour" with member firms, investors and others. He also has launched the Finra360 initiative to solicit feedback about possible reforms.

"We are making changes to improve the day-to-day operations of our programs," Mr. Cook said at the Financial Industry Regulatory Authority Inc.'s annual conference in Washington. "Just last month, we committed to substantially increase our spending over the next two years to transform the way we bring new examiners on board and to enhance how we train examiners and coordinators."

Finra did not reveal the amount it is spending on the training improvements.

He also mentioned that he's hearing concerns about how Finra enforces its rules on the 3,800 brokerages and 633,800 brokers it oversees.

"Dialogue with our stakeholders over the last several months has highlighted a desire for more clarity around how we approach our work, including how we make choices in enforcement proceedings," Mr. Cook said. "While there are well-developed standards and processes currently in place at Finra, we are committed, as part of Finra360's review of our enforcement program, to take a fresh look at what we do today and to provide greater transparency and guidance to the industry where appropriate."

Finra members also want the regulator to be "aggressive in dealing with the relatively small percentage of bad actors whose actions not only harm investors but also undermine confidence in the industry as a whole."

The Finra board last week advanced measures that would strengthen the regulator's oversight of "high-risk" brokers, which is an ongoing challenge for the regulator.

"This is an area of continued focus by Finra's board and management, and we are reviewing a number of potential additional steps," Mr. Cook said.

He also said that he is trying to strike a balance between being "vigilant" about "bad apples" while emphasizing that the vast majority of registered representatives follow the rules.

In the nine months he's led Finra, Mr. Cook said that he has a new appreciation for the Securities and Exchange Commission's oversight of Finra's operations. The SEC must approve Finra rules and also reviews its examination program.

A former director of the SEC Division of Trading and Markets, Mr. Cook is now on the receiving end of scrutiny from the SEC, which recently stepped up its efforts in that area after shifting more responsibility for broker exams to Finra.

But Mr. Cook has yet to meet the new SEC chairman, Jay Clayton.

"We haven't sat down to talk," Mr. Cook told reporters on the sidelines of the Finra conference.

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