Disgruntled member firms presented a number of non-binding proposals at FIN RA’s August 2010 annual meeting. The proposals, which the members approved by more than a two-thirds vote, called for FIN RA to:

  • Disclose annual compensation for its ten most highly compensated employees;
  • Disclose information about its investment activities;
  • Make Board of Governors’ meetings public;
  • Give member firms a “say on pay” for FINRA executives;
  • Conduct an independent study of relationships between the Bernard Madoff family and FINRA officers and directors;
  • Release all correspondence with the Internal Revenue Service regarding the $35,000 payment to member firms in connection with the merger of NASD and NYSE Regulation; and
  • Hire an independent inspector general.

In response, FIN RA’s Board agreed to disclose executive compensation, and the identities of the money management firms FIN RA uses. Although the Board declined to make its meetings public, it agreed to publish rulemaking items discussed and/or resolved at Board meetings.

The Board declined to take action on the remaining proposals. FIN RA Chairman and CEO Richard Ketchum explained that “say on pay” could create the perception that member firms could improperly intimidate FINRA staff. At the same time, a Board subcommittee released a report addressing allegations by Amerivet Securities, Inc. that FIN RA overpaid executives while sustaining significant investment losses due to reckless investing. The report approved FIN RA’s practice of benchmarking executive salaries against financial services firms, rather than against non-profits and government agencies, because FIN RA requires of its executives a “different skill set and knowledge base” than many of the latter organizations.

Three representatives of small member firms also have criticized FIN RA for awarding $1 million to four law schools to fund clinics helping small investors file claims against brokerage firms. At the August meeting, these three representatives defeated FIN RA-endorsed candidates for seats on the FIN RA Board.