Finra CEO: Regulator will consider more transparency

Robert Cook, sitting down with critic David Burton of the Heritage Foundation, says Finra may become more open with board deliberations and how it spends fine money.
OCT 06, 2017

Finra president and chief executive Robert W. Cook said on Friday that the broker-dealer regulator will consider making its board deliberations public and providing more transparency about how it spends fine proceeds. The potential moves could result from Mr. Cook's Finra 360 initiative, a self-examination that the organization launched earlier this year. At an event at the Heritage Foundation in Washington, Mr. Cook was cautious not to make any promises about whether either reform would be enacted. "That's a journey," Mr. Cook said in reference to opening its board meetings. "There is more work we are and will be doing on that front. That's going to be a board-level decision. That's not a Robert Cook decision. The guiding principle that ought to be taken into account is: Will this help us be a better self regulatory organization?" The session was designed as a conversation between Mr. Cook and Heritage scholar David Burton, an expert on financial regulation and author of a report this year that took Finra to task over its structure and operations. HARD QUESTIONS Mr. Burton pressed Mr. Cook on whether the industry funded regulator would report publicly how it spends fine money. Last year, Finra collected a record $173 million in penalties. That subject also was part of an in-depth InvestmentNews analysis of Finra published in September. As he has in other public appearances, Mr. Cook reiterated that Finra allocates fine revenue to capital projects and regulatory programs. He added, however, that as the board puts together Finra's 2018 budget later this year, it will revisit Finra's policy of not revealing details of how it allocates fine proceeds. "We are looking at this issue," Mr. Cook said. "We're working with the board to think through what is the right approach to fines going forward. We recognize there is a perception issue." Shortly after being appointed to the helm of the Financial Industry Regulatory Authority Inc. in August 2016, Mr. Cook launched what he calls a listening tour. Friday's event at Heritage was an interesting example of the initiative because it sat Mr. Cook within feet of one of Finra's toughest critics. Mr. Burton praised Mr. Cook on Finra 360 and his listening mode. "He has, in my judgment, done the right things," Mr. Burton said. But, like many others calling for Finra reform, he asked Mr. Cook when Finra 360 would result in major actions. "At some point, we need to move past talking about change and actually trying to get some change done," Mr. Burton said. STEPS TAKEN Finra has implemented some reforms already as part of Finra 360, Mr. Cook said. For instance, it has streamlined its enforcement arm and posted more information about the board on its website. "We're really trying to move with a sense of urgency, especially on this small stuff," Mr. Cook said. Finra 360 is a "rolling process," Mr. Cook said. The regulator will launch changes periodically rather than saving them all for the conclusion of the initiative. But reform of how Finra is governed may unfold slowly. "When it comes to issues around changes in governance structure, we'll take the input we got and we'll either act on it and share that or talk more about why we wouldn't," Mr. Cook said. Mr. Cook envisions Finra 360 as a "multi-year process." He has been meeting with Finra members, investor advocates, other regulators and experts. "We're open for business in terms of getting input from people who have ideas, thoughts," Mr. Cook said. "I want to look at whatever makes us a better SRO."

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