6.8.2009 FINRA Chairman and CEO Rick Ketchum spoke at the National Association of Variable Annuities Government & Regulatory Affairs Conference and went though some of the “extensive” reviews of the U.S. regulatory system that were ongoing, as well as recent concerns identified by FINRA. Chairman Ketchum stated that “the fundamental objective of any regulatory reform must be to enhance investor protection,” and that FINRA was taking a number of actions to enhance investor protection: (1) creating an Office of the Whistleblower, to encourage individuals with first-hand knowledge of, or material information about, potentially illegal or unethical activity to come forward and share it with regulators; (2) conducting a comprehensive review of examination and regulatory programs to help FINRA better identify red flags that may indicate fraud; (3) launching two regulatory reviews, one related to custody issues in firms that are registered as both broker-dealer and investment adviser and the other related to the role of broker-dealers as feeders or finders for money managers such as Bernard Madoff; and (4) launching a sweep examination to review the type of activity evident in the Madoff scheme.  

Chairman Ketchum gave the following “rationale starting point” for basic protections that should be part of securities regulation:

  • Every person who provides financial advice and sells a financial product is tested, qualified and licensed;
  • The advertising for financial products and services is not misleading;
  • Every product marketed to them is appropriate for recommendation to that investor; and
  • There is full and comprehensive disclosure for the services and products being marketed.

Ketchum then discussed certain areas that need to be addressed by new regulations: (1) the need for consistency in the regulation of annuities; (2) the absence of a comprehensive examination program for investment advisers; and (3) the supervision of “wealth events.”

Click http://www.finra.org/Newsroom/Speeches/Ketchum/P118889 to access Chairman Ketchum’s speech.