Must make it clear that investors come first, not the firms being regulated
When Richard Ketch-um hangs up his sheriff's badge sometime in the near future, it will truly mark the end of an era. The career regulator became the Financial Industry Regulatory Authority Inc.'s chief executive in 2009 in the middle of the financial crisis. Since he has led the self-regulatory organization, which oversees 4,000 brokerage firms and 643,000 registered representatives, the industry has undergone tremendous change.
From major advances in technology to the most significant piece of financial regulation in decades and an unrelenting economic environment that has seen countless firms close or merge, the brokerage industry has been buffeted on all sides.
Late last month, Mr. Ketchum, who will turn 65 in December, said he would retire but remain in the position until a replacement is found.
To his credit, Mr. Ketchum appears to have done well to keep Finra relevant during these turbulent times. Known as affable and approachable, he worked with the industry, not simply against it. He made sure that Finra staff members had a deep understanding of the business and the firms they oversee.
Those close ties and relationships to the industry, however, also raised the question of whether he was, in fact, too close to the industry he oversaw. How deeply was he dedicated to investor protection, one of Finra's two main functions?
Take the recently passed BrokerCheck rule, for example. Last month, the Securities and Exchange Commission approved Finra's rule requiring brokerage firms to include a link to a public database containing background information about their brokers on their websites.
The rule was first proposed nearly three years ago but withdrawn twice following industry criticism about its feasibility. The watered-down rule hit the books with a whimper, without any kind of major marketing or advertising campaign to inform investors that they had a tool to more easily examine their brokers. Finra's five-week, $3.5 million campaign back in June doesn't really count.
That's one example. There are others. Remember CARDS?
To be sure, whoever replaces Mr. Ketchum will have big shoes to fill and his or her hands full.
We hope that Finra's next chief executive will continue Mr. Ketchum's good work, but beyond that, make it clear to investors and brokerage firms alike that investors come first, not the firms being regulated.
