Finra is evaluating itself from "top to bottom" to seek ways to improve its interactions with brokerage firms and financial advisers it regulates, president and chief exeuctive Robert Cook said on Wednesday.
As part of the Finra 360 initiative, the broker-dealer self-regulator opened a public comment period on Tuesday in which it is soliciting feedback on its "engagement programs," including Financial Industry Regulatory Authority Inc. committees, its rulemaking process and "member relations." The
comment deadline is May 5.
The evaluation stems from the
"listening tour" that Mr. Cook launched shortly after he was appointed to the helm of the regulator.
"The idea is that we want to look at ourselves from all perspectives ... top to bottom," Mr. Cook said at the Securities Industry and Financial Markets Association compliance conference in San Diego. "It's building into Finra a process of continuous self-improvement."
Among the questions that Finra is tackling, according to Mr. Cook, are whether it can streamline regulatory operations, use data analytics more effectively and better measure its success.
For example, it has enforcement capability in both its member and open-market regulation operations. The organization is mulling whether it should combine those two enforcement arms or keep them separate.
It also is trying to determine whether Finra members and the public who serve on Finra committees are having any kind of influence on how the regulator does its work.
"Are we listening to you when you express your views in committee?" Mr. Cook said.
As he conducts his listening tour, Mr. Cook also is hearing about enforcement. For example, some members complained that the level of customer harm — or lack of it — is not taken into account when Finra sanctions firms.
"That is something we're thinking about," Mr. Cook said.
Other enforcement changes that have been suggested are giving more credit for self-reporting and establishing an appeals process.
It's not clear when or if Finra will act on the advice, but Mr. Cook indicated that his outreach to members will continue indefinitely rather than just being an initiative to kick off his tenure.
Ira Hammerman, SIFMA executive vice president and general counsel, said that Finra member firms should have a say in how the self-regulator functions.
"It's a great idea," Mr. Hammerman said in a Tuesday interview on the sidelines of the conference. "Finra is paid for by the industry, and the industry has a legitimate need and opportunity to participate in the process."
Mr. Hammerman conducted the Q&A with Mr. Cook on Wednesday and asked him how he responds to critics on the right who think that Finra is a "mini" Securities and Exchange Commission, which itself oversees Finra, and critics on the left who say that Finra is "captured" by its member firms.
"I'm still trying to figure that out myself," Mr. Cook said.
But he asserted that an SRO like Finra has an important role to play in regulating the industry because it can have a "dialogue with the industry."
"We can do that in ways the government can't," Mr. Cook said.
