Finra's new chief Robert Cook vows to take a 'fresh look' at enforcement

The recently appointed CEO acknowledged Monday night that he'd heard loud and clear the complaints brokerage industry executives had with their principal regulator

Jan 24, 2017 @ 11:04 am

By Bruce Kelly

Striking a conciliatory tone with broker-dealers, Robert Cook, the recently appointed head of Finra acknowledged Monday night that he'd heard loud and clear the complaints brokerage industry executives had with their principal regulator.

Since stepping into his new job in August, Mr. Cook has been on a listening tour of broker-dealers. At first he thought such an endeavor would take just a few months, but now he realizes it will be an essential aspect of his job in the coming years.

“For an organization like [the Financial Industry Regulatory Authority Inc.], listening should be in our DNA,” said Mr. Cook, who made the comments in San Francisco during an interview with Dale Brown, the chief executive of the Financial Services Institute, to kick off the trade group's annual meeting.

“What I'm hearing though is also a sense that some feel that Finra has been a little bit of a tin-ear over the years, not listening very well,” he said. “And that's something I hope to change.”

In his remarks, Mr. Cook struck an accommodating tone, stressing that Finra was both a membership organization and regulator. Some firms liked Finra's recent emphasis on a risk-based exam approach, he said. Finra also intends to share exam data with firms as a way of heading off compliance problems and helping small firms comply with rules.

(Related read: Finra outlines new examination priorities for 2017)

Mr. Cook is being closely watched by the securities industry at the moment. Finra's last two leaders, Mary Schapiro and Rick Ketchum, were for the most part career regulators. Although Mr. Cook has worked at the Securities and Exchange Commission, the bulk of his career has been spent in private practice, representing broker-dealers in compliance issues.

Some, particularly attorneys of the plaintiffs' bar, wonder whether his history with Wall Street will make him more sympathetic to the industry.

Broker-dealer executives routinely grumble about Finra in private, criticizing its lack of transparency when issuing fines for industry violations or the lack of knowledge displayed by some when conducting exams.

(Related read: SEC announces 2017 exam priorities, adds robo-advisers to list)

Asked about whether Finra has engaged in rulemaking by enforcement, a common criticism from FSI, Mr. Cook replied that he had heard that comment speaking to firms and he found that to be “troubling.”

“I just philosophically think that we shouldn't be rulemaking by enforcement,” he said. “One of the areas of interest to me is to think about Finra's enforcement program. I want to take a fresh look at it, and to ask ourselves what is the process by which we create an enforcement action. What kind of steps we go through and how do we think about that.”

Broker-dealer executives liked what they heard.

“I appreciate him taking a fresh look and open attitude,” said Jim Nagengast, CEO and president of Securities America Inc. “Increased transparency is what we're all looking for in this industry, so I think we're on the right track.”

“I think he's going to be an interesting guy to work with,” said John Rooney, managing principal with Commonwealth Financial Network. “He brings a fresh perspective to the relationship with Finra and its various stakeholders.”

“It sounds like he wants to move Finra forward now that it's been a decade since the organization was created by the merger of NASD and NYSE Regulation and creating Finra 2.0,” Mr. Rooney said. “He's moving past trying to reconcile those two groups and moving forward with an integrated supervisor for the financial services industry.”


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