On May 17, 2017, at the annual FINRA conference in Washington D.C., FINRA President and CEO Robert Cook discussed the recently-launched FINRA360 initiative: a top-to-bottom review of FINRA’s operations and organization. Cook recognized that 2017 marks FINRA’s ten-year anniversary since its “successful” but “complicated” merger of the National Association of Securities Dealers (NASD) and the regulatory arm of the New York Stock Exchange (NYSE). He stated that, for the first time since its inception, FINRA now has occasion to conduct a “comprehensive, organization-wide self-assessment and improvement initiative.”

As part of FINRA360, Cook has been on what he dubbed a “listening tour.” During the listening tour, Cook has met with member firms, investors, and others from inside and outside the brokerage industry. He has also participated in a “continuing series of small member roundtables across the country,” gaining a great deal of useful feedback regarding how FINRA can improve. As a result of the listening tour, Cook learned that FINRA should be asking itself the following three “key” questions:

  • Are our policies and programs focusing on the right issues, establishing the right standards, and dedicating resources to the right areas to best protect investors and market integrity while promoting healthy and vibrant capital markets?
  • Is our organization and operation optimally organized and managed to be the most effective and efficient self-regulatory organization that it can be?
  • Are we facilitating a constructive dialogue with members, investors, and other stakeholders to better understand their perspectives and develop an effective regulatory framework that is fully informed by the expertise and practical knowledge of its stakeholders?

CEO Cook provided a “concrete” example of a proposed improvement arising out of the FINRA360 initiative: consolidating FINRA’s enforcement programs. He explained that FINRA has an enforcement program in its “member regulation group” and another in its “market regulation group.” He stated that, during the listening tour, he learned that stakeholders encounter these groups as “two different regulators.” As a result, FINRA is trying determining whether these operations should be (1) “more coordinated” or (2) combined into one. FINRA is weighing the pros and cons of each approach.

Consolidating the Member Regulation and Market Regulation groups would have significant effects. As background, FINRA’s Member Regulation department examines firms and its employees to ensure compliance with its rules, as well as those of the SEC and the Municipal Securities Rulemaking Board. FINRA’s Market Regulation department, on the other hand, oversees and regulates over-the-counter (OTC) trading of exchange-listed and non-exchange listed securities.

Be on the lookout for any FINRA notices requesting comments related to the FINRA360 initiative.