Finra, it’s high time for transparency
A call for new Finra leadership to be more forthcoming about the board's work.
The Finra board met recently and appointed a new chairman. It also took action on a few rule proposals. It’s likely the public found out only after the fact that these decisions were even on the table.
So what’s next for the board? And when will it meet? Those are good questions, but good luck trying to get answers.
What do we know?
The Financial Industry Regulatory Authority Inc.’s board meets just about every two months, sometime around the middle of the month. It’s usually on a Thursday, but sometimes on a Friday. Finra never lists the actual meeting date or location.
The board usually will post its agenda on the web — but not always. And when it does, it’s on a page buried deep on its site.
And the meetings themselves?
The Finra board deliberates behind closed doors. The results are posted on the web — usually in the What’s New section — accompanied by a video in which current Finra chairman and CEO Richard Ketchum tees up softball questions for the board’s lead governor.
LAG OF WEEKS
They touch on the board’s actions without going into great depth — and they always assure the audience that the meeting produced investor-protection advances.
We’ll just have to take their word for that, because there is sometimes a lag of weeks, if not months, between the announcement of the board approving a proposal or sending a rule to the SEC and Finra’s posting of the text of the proposal or rule.
For an organization trying to emulate the Securities and Exchange Commission, Finra has a long way to go before it’s as transparent as that independent regulator. The SEC is often the target of criticism from financial advisers. But give the agency its due when it comes to its operations — for the most part, they occur in the light of day.
Under federal sunshine laws, the SEC must post on its website a notice of upcoming meetings. Prior to the sessions, the agency also posts the agenda. And importantly, it’s easy to find.
Most of the votes the SEC takes are not only public but also televised in a webcast.
It may not be feasible to broadcast Finra board deliberations live. But it is perfectly reasonable to expect Finra to disseminate in advance an agenda that is easy for the public — and journalists, who aim to inform the public — to find.
We can hear the push-back from Finra now: But wait a minute, we’re not a government agency. We don’t operate under sunshine laws.
That’s true. But what’s the harm? Why the secrecy?
If Finra wants to be taken more seriously as a regulator, it must do a better job of explaining what its leadership is up to and when.
It can learn from another self-regulatory organization, the Municipal Securities Rulemaking Board. Last Wednesday, the MSRB released a notice about its board meeting, which will take place Wednesday and Thursday. It told the world exactly when the board was convening and provided an outline of the eight-topic agenda along with a brief description of each item — and the globe continued to spin properly on its axis.
IMPORTANT FIRST STEP
Now it is time for Finra to shine more light on its operations.
New board chairman John “Jack” Brennan, Vanguard chairman emeritus, takes over on Aug. 15. Finra’s new CEO, Robert W. Cook, starts his job around the same time. Mr. Brennan served for five years as the lead board governor under Mr. Ketchum.
We urge Mr. Brennan and Mr. Cook to be more forthcoming about the board’s work. It would be an easy but important first step in making Finra more accessible to its broker members and, more importantly, to investors.
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