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Regulation and Compliance > Federal Regulation > FINRA

Schapiro's 'light touch' leaves scars

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I’d hate to see her heavy touch. The Wall Street Journal reports on Mary Schapiro’s time at the NASD and as head of FINRA, attempting to make the case she didn’t do a whole lot in the area of enforcement. Anyone else agree with that assessment? As she herself told me a few years back, her “tough-but-fair style” resulted in record fines collected by the organization, which she attributed to greater scrutiny. Granted, the paper is referring to her relations with the larger Wall Street firms, which only makes it worse. I can’t tell you the number of independent advisors and RIAs that have related horror stories of random rulings the SRO has handed down; rulings un-tethered from any uniform policy. One high-net-worth advisor was sanctioned for a particular action, and another advisor with the same set of circumstances was sanctioned for doing the exact opposite. For the little guy, it was always damned if you do, damned if you don’t.

Even for advisors who avoided formal sanction, the regulatory environment has ‘em losing their hair. FINRA “interpretations” of their notices are anything but, and the vague, open-ended manner in which they’re written leave broker/dealer compliance departments twisting themselves in knots. My favorite anecdote was the advisor who organized a golf tournament for his clients. He wanted the name of his firm and his broker/dealer printed on the golf balls. Fine, the B/D said, if the proper disclaimer was included. As the advisor noted, it would have covered the entire ball in miniscule type and looked ridiculous. Didn’t matter; the broker/dealer ruled that if a golfer happened upon one of the lost balls in the woods (even years later) it would constitute an offer to sell. I’m sure you have many, many stories just like this. That said, I think it’s safe to say the paper’s fears are unfounded, especially given the market in which we now find ourselves.