The Financial Industry Regulatory Authority Inc. is telling its member firms to vote against a series of proxy proposals put forth by a small California broker-dealer.
The Financial Industry Regulatory Authority Inc. is telling its member firms to vote against a series of proxy proposals put forth by a small California broker-dealer.
In its proxy released Monday, Finra urged members to vote down seven non-binding proposals that urge Finra to:
--disclose the pay of Finra's top ten most highly compensated employees
--offer a "say on pay" vote for the top five most highly compensated employees
--study current or former Finra officers' or directors' involvement with the Bernard Madoff family and firms
--disclose the investment consultants and financial firms Finra uses in its own investment activities
--make Finra's board meetings public
--create an independent inspector general for Finra
--disclose an IRS opinion letter concerning the NASD's $35,000 payment to members following the 2007 merger
The proposals were offered by Amerivet Securities Inc., which is involved in separate litigation with Finra over related governance procedures.
Final votes on the proposals will be counted on August 12 during Finra's annual meeting.
By making the proposals non-binding, Finra " had no choice but to put" the proposals in the proxy, said Johnathan Cuneo, founding member of Cuneo Gilbert & LaDuca LLP, who represents Amerivet.
In the proxy statement posted to its website Monday, Finra said it already releases compensation data in its annual tax return, and that giving members a say on pay "would give an inappropriate perception of the membership’s influence on the Finra regulatory program."
But Amerivet, in an earlier June letter to Finra, argued that Finra's tax forms are nearly a year old by the time they become public and that a non-binding say on pay would lessen "the perception that Finra’s hand-picked board rubber stamps huge compensation packages that are undeserved."
About Madoff, Finra said a review would simply duplicate a 2009 inquiry by a Finra board committee.
Amerivet claimed that the Finra committee did not have the authority to review dealings between senior Finra officials and the Madoff family and businesses.
Finra furthermore said that disclosure of the investment intermediaries and products it uses risks giving an impression that it endorses certain firms or investments.
Amerivet said more investment transparency was called for given the large losses Finra experienced in 2008.
In addition, Finra said opening up its board meetings "could stifle candid deliberations," and that information arising from board meetings was already disclosed.
In contrast, Amerivet said there was no reason Finra, even though it is a private non-profit, couldn't be as transparent as government entities.
Finra also recommended against an inspector general, saying its existing internal audit department and its ombudsman’s office already perform oversight roles.
But in its June letter, Amerivet argued that there is "no mechanism through which a Finra member can gain any independent review" of Finra's conduct.
Regarding the $35,000 payment, Finra said several court decisions upheld its right to keep the IRS opinion letter confidential for competitive reasons.
Amerivet said Finra's claim that $35,000 was the most it could pay under IRS rules was false, and it was no secret that the actual limit was substantially higher.
"I think the majority of [Finra's] arguments miss the point and are superficial," Mr. Cuneo said.
Finra spokesman Herb Perone was not immediately available late Monday.
