Since the presidential election, heck, since the campaign, my friends and family will readily attest that my new favorite word is “gaslighting.” According to Wikipedia, it is “is a form of manipulation that seeks to sow seeds of doubt in a targeted individual or group, hoping to make the target question their own memory, perception, and sanity.”[1] Google it, and you will see just how frequently it is being discussed these days. How else to account for situations where facts that are plain and obvious – for instance, the difference in the number of people standing on the National Mall in front of the Capital Building watching two presidential inaugurations as revealed in two different pictures taken from the same vantage point at the same time of day – are not just denied, but staunchly denied, to the point where you start to question your own five senses.

Bruce Kelly of the Investment News – someone I know and trust – reported this week on remarks that Robert Cook, FINRA’s CEO, gave at a conference hosted by the Financial Services Institute, a trade group comprised of independent financial services firms and financial advisors. According to the article:

  • Mr. Cook said, “What I’m hearing though is also a sense that some feel that FINRA has been a little bit of a tin-ear over the years, not listening very well, and that’s something I hope to change.”
  • When asked whether FINRA has engaged in “rulemaking by enforcement,” Mr. Cook apparently said “that he had heard that comment speaking to firms and he found that to be ‘troubling,’” adding, “I just philosophically think that we shouldn’t be rulemaking by enforcement. One of the areas of interest to me is to think about FINRA’s enforcement program. I want to take a fresh look at it, and to ask ourselves what is the process by which we create an enforcement action. What kind of steps we go through and how do we think about that.”
  • “Mr. Cook struck an accommodating tone, stressing that FINRA was both a membership organization and regulator.”

Admittedly, I was not present at the conference, and neither FINRA nor the FSI has published anything regarding the dialogue on which Investment News reported. But, as I said, I know the author of the article, and am confident that he reported it accurately. So, the question is, do I believe my eyes when I read these things, things which, based on my 35+ years of experience, sound more like science fiction than words being attributed to the head of FINRA?

To be honest, the jury is still out on that, as only time will tell. But, I do know that, at a minimum, Mr. Cook is consistent: he made some fairly similar remarks at the SIFMA Compliance conference in January, which are published on the FINRA website. While speaking of FINRA’s transparency, he mentioned FINRA’s “unique regulatory model,” and noted that “FINRA operates under a variety of rules and limitations created by Congress, the SEC and our own organizational documents that are designed to make us both a membership organization and a credible regulator.” For years, I have been espousing the same concept, i.e., that FINRA is not just an Enforcement entity, but, more importantly, a membership organization, designed to represent the interests of those member firms.

Sadly, in recent years, FINRA has lost sight of that fact, and has been working contrary to the interests of its members, or at least with seeming disinterest in what its members say they want and need from their primary regulator. Instead, it has been driven by other concerns, perhaps principal among which is simply avoiding looking like it is doing an ineffective job at fulfilling its statutory mandate of protecting investors and the integrity of the markets.

Anyway, the problem with the fact that Mr. Cook has been consistent is that it still doesn’t necessarily mean that he truly intends to change a thing. One of the hallmarks of gaslighting is the repetition – the more you state a lie, the more legit it starts to sound. Eventually, the lie begins to sound true even if merely for the fact that after a while, it loses any sense of audacity.

I found an article on gaslighting by Psychology Today on the internet. According to that author, “when dealing with a person or entity that gaslights, look at what they are doing rather than what they are saying. What they are saying means nothing. It is just talk. What they are doing is the issue.” That is the approach I intend to take with FINRA (as well as the president). I sincerely hope that Mr. Cook means what he has been saying. Historically, however, as I have pointed out over the years, there has been a large disconnect between, on the one hand, the warm-and-fuzzy comments that FINRA management make at industry meetings and, on the other hand, the attitudes demonstrated by the FINRA examiners and attorneys who continue to pound my clients with incessant 8210 requests and threatened and actual Enforcement actions. I hope that FINRA’s actions will demonstrate that Mr. Cook isn’t “just talk.”