On August 19, 2019, the Financial Industry Regulatory Authority ("FINRA") will conduct its annual meeting, at which time the self-regulatory organization will elect one small firm Governor (up to 150 registered representatives) and one large firm Governor (500 or more registered representatives) for a three-year term. Pursuant to FINRA's rules, member firms may only vote for a nominee from their respective sized firm. A proxy was mailed to each eligible firm's Executive Representative. Proxies may be submitted by "any lawful means," which include telephone, mail, or Internet. In order to ensure that the voice of FINRA's small firm community is heard, it is critical that you ensure that your firm's proxy is timely submitted by your Executive Representative. "Notice of Annual Meeting of FINRA Firms and Proxy" (Election Notice, July 19, 2019).
The list of candidates who were either nominated by the Nominating Committee or via Petition, and were certified by FINRA's Corporate Secretary for the 2019 Election are as follows:
Large Firm Governor Candidates
FINRA Nominating Committee Nominee
- Andrew S. Duff, Board of Directors, Piper Jaffray & Co.
Nominee by Petition
- Chris W. Flint, President & Chief Executive Officer, ProEquities, Inc.
Small Firm Governor Candidates
FINRA Nominating Committee Nominee
- Robert A. Muh, Chief Executive Officer, Sutter Securities
Nominee by Petition
- Linde Murphy, Chief Compliance Officer, M.E. Allison & Co., Inc.
The BrokeAndBroker.com Blog offered all candidates an annual opportunity to post a statement concerning their nomination. This year we received submissions by the July 24th 5 p.m. EDT deadline from FINRA Small Firm Governor candidates Robert A. Muh and Linde Murphy:= = = = =
I am seeking re-election to the FINRA Board of Governors. I have been nominated by the independent Nominating and Governance Committee of The FINRA Board. No one from FINRA is a member of this committee and FINRA does not participate in any way in the selection process. This committee is comprised of three industry governors and four public governors. This nomination is completely independent of the FINRA staff and leadership.
If elected, I will continue to put my 40 years of experience, independence and industry relationships to work for the small broker-dealer. I am the CEO of Sutter Securities, a role I have held for over 25 years. Sutter is a boutique investment banking firm I co-founded in 1992. Prior to this, after serving as a 2nd Lt. in the Army and spending three years at McKinsey & Co., I was a general partner at Bear Stearns and Chairman of Newburger Loeb & Co., a NYSE member and self-clearing firm.
I also have extensive experience as an independent board member, having served on the boards of 25 corporate and nonprofit organizations, ten of which were publicly traded companies. I am currently an Adjunct Professor at the University of San Francisco School of Law.
There's a crisis in the financial services industry for small broker-dealers. The largest contributing factors are the cost of compliance and for those firms that maintain a retail business, the challenges facing an introducing firm in finding and maintaining an economic clearing relationship.
Two major challenges for small firms are the new Regulation Best Interest and the unfair competitive advantage of the lightly regulated Registered Investment Advisor. As a result of these challenges, the number of new small broker-dealers has declined dramatically. In the past four years there has been a net loss of 1,345 small broker-dealers!
A majority of the Board members are not from our industry! Small firms make up 90% of FINRA's membership but have only three of the Board's 24 seats. With limited representation, it is imperative that we have a voice with experience and credibility that will be listened to by the public board members. During the past three years, I have demonstrated that I have the ability to educate the public Board members about the impact of rules and regulations on the small broker-dealer. I believe I am the only small firm candidate with the necessary experience and background for this challenging task.
Many of you may have seen me on various panels at numerous FINRA conferences advocating for small firms.
I have helped enact meaningful change for small firms during my time on the Board. One of the most meaningful changes is the significant improvement in the examination process for small firms. Many small firms can now look forward to a four-year exam cycle.
Three years ago, I met with FINRA's CEO and proposed that FINRA change its licensing process to provide an easier path for entry into the industry. As a direct result of my efforts, FINRA has changed its licensing examination process so that individuals can take the Securities Industry Essentials (SIE) Exam. without being sponsored by a FINRA member. This opens the door for many individuals that might not be able to get the necessary sponsorship. More than 40,000 people have already taken the SIE exam.
In addition, fees have not been raised in the past three years although FINRA revenues have declined.
B.S. Massachusetts Institute of Technology
MBA and M.Phil. Columbia University
I can be reached via email at email@example.com or by phone at 415-352-6310.
Whether intended or not, FINRA is eradicating small firms through death by a thousand cuts delivered in the form of overwhelming regulation. Every week, we see more small firms shut their doors while our Inbox is overloaded with request for comments on additional regulations, more systems to report to, fee invoices, and more.
During all of this, I've maintained contact with firms across my district and others. I reach out to firms and work tirelessly with consultants to find out what challenges you are facing and how we can lighten the overwhelming regulatory burden while still maintaining customer protection and high ethical standards. If you have issues or suggestions on how to help Small Firms, please call or email me at (210)264-6297 or firstname.lastname@example.org.
= = = = =
A personal message from Bill Singer
I am one of the founders of the NASD Dissident/Reform Movement (now the FINRA Dissident/Reform Movement), and a member of the 1998 slate of the first four petition candidates to successfully challenge the self-regulatory-organization's process of anointing its industry Board members. I am a fervent proponent of robust, contested elections as a means of democratizing FINRA's Board, which I view as a gerrymandered body designed to entrench the power of the regulator's Large Member Firms and industry special interests. That rigged construct rebuffs meaningful Wall Street reform, artificially constrains the Small Firm Members' influence, and denies proportionate representation for the industry's associated persons and public customers.
It has come to my attention that the following email was sent as noted below:
From: FINRA Board of Governors Nominating Committee [mailto:email@example.com]
Sent: Thursday, July 25, 2019 12:00 PM
Subject: FINRA Board Election
Dear Small Firm representative,
We are writing to you as the independent Nominating and Governance Committee of The FINRA Board of Governors, to encourage you to cast your vote for Bob Muh to represent you as Small Firm Governor on the FINRA Board of Governors. Our committee is comprised of three industry governors and four public governors. No one from FINRA is a member of this committee and FINRA does not participate in any way in our selection process. Our decision is completely independent of the FINRA staff and leadership.
The role of the small firm representatives on the Board, representing over 3,200 such institutions, is a crucial one that demands significant industry experience. Bob has been an extremely effective advocate for small firms and has the best experience and depth of background to educate and persuade members as to the impact of rules and regulations on small broker-dealers.
Your vote is important.
Bob Muh brings 40 years of industry experience and has devoted his entire career representing and championing the needs and interests of small firms.
Bob has been an actively engaged member of the Board of Governors and he has led the efforts to enact meaningful changes beneficial to small firms.
As a result of Bob's leadership many small firms will now have the benefit of a four-year interval for their Cycle Exam.
In addition, Bob has successfully advocated against fee increases.
The majority of the FINRA board are not from the industry and they have all looked to Bob to get an understanding of the impact of rule proposals on the small firm.
Bob Muh is the right candidate to represent you and other small firms. Enclosed you will find a personal statement from Bob.
How to Vote:
You recently received an important notice from FINRA - an official ballot to elect a member to the small member firm vacancy on The FINRA Board of Governors. Voting is easy and convenient, and can be done either by mail, phone, or online as explained below. You can cast your vote by phone or online until 8:59am EDT on August 19, 2019. Mailed ballots must be received no later than until 8:59am EDT on August 19, 2019.
To vote by mail: simply return your executed ballot in the pre-paid envelope provided in your previous notice from FINRA. Please mark, sign and date your proxy, then return it in the pre-paid envelope provided or return it to Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230.
To vote by phone: call toll-free: 1-888-693-8683.
To vote online: have your proxy card available when you access the website: www.cesvote.com and follow the instructions presented to submit your proxy.
Nominating and Governance Committee of The Board of Governors of FINRA
The Nominating CommitteeSec. 9. (a) Except as otherwise provided in these By-Laws, the Nominating Committee shall nominate and, in the event of a contested election, may, as described in Section 11(b), support: Large Firm, Mid-Size Firm, Small Firm, Public, Floor Member, Independent Dealer/Insurance Affiliate and Investment Company Affiliate Governors for each such vacant or new Governor position on the Board; Industry and Public Directors for each vacant or new position on the NASD Regulation Board and the NASD Dispute Resolution Board for election by the stockholder; and Industry and Public members for each vacant or new position on the National Adjudicatory Council for appointment by the NASD Regulation Board. . . .Communication of ViewsSec. 11. (a) The Corporation, the Board, a committee appointed pursuant to Article IX, Section 1, and the Corporation's staff shall not take any position publicly or with a member or person associated with or employed by a member with respect to any candidate in a contested election or nomination held pursuant to these By-Laws or the NASD Regulation By-Laws. A Governor or a member of any committee (other than the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein)) may communicate his or her views with respect to any candidate if such Governor or committee member acts solely in his or her individual capacity and disclaims any intention to communicate in any official capacity on behalf of the Corporation, the Board, or any committee (other than the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein)). Except as provided herein, any candidate and his or her representatives may communicate support for the candidate to a member or person associated with or employed by a member.(b) In a contested election, the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) may support its nominees under this Article by sending to members eligible to vote up to two mailings of materials in support of its nominees in lieu of mailings sent by its candidates under Article VII, Section 12. In addition to such mailings, in the event of mailings and or other communications to members by or on behalf of a candidate by petition in a contested election, the Nominating Committee (or, in the case of Article XXII, the relevant body with the authority to nominate as specified therein) may respond in-kind, but shall not take a position unresponsive, to the contesting candidate's communications.
3. The Contested Election Process
In the Report issued by the Rudman Committee in its review of the NASD's operations, the Committee discussed the NASD's District Nominating Committee and made particular reference to a contested election in 1994 in District 10.
The Rudman Committee stated:
[The NASD] addressed issues that arose on an ad hoc basis, and generally handled the election inappropriately -- particularly insofar as NASD staff appeared to take sides in the matter. NASD officials have acknowledged that the election was mishandled.--
The gist of the Rudman Committee's concerns arose out of two letters sent by the District 10 Nominating Committee, the first of which was on NASD letterhead, endorsing the candidacy of one person over the challenger. In addition, volunteers recruited by the NASD's District Nominating Committee actively campaigned in support of the successful candidate.
The NASD's By-Laws only specifically authorize the Nominating Committee to select the regular candidate. The NASD, its committees and its staff should not in any way exhibit favoritism or partiality in such elections.
(a) District Nominating Committees should be directed to consider diversity in the size and type of firms represented on the District Committees, especially in Districts that have larger-than-average Committees.
(b) In the event of a contested election for District Committee seats, the NASD and its staff should remain strictly neutral. To the extent that NASD or NASDR resources are employed in the election process, they should be made available on an equal basis to all candidates.
I have long supported Robert Muh's various campaigns for FINRA elective office. He is, indeed, a sincere advocate on behalf of the Small Firm community and a wonderful person. I would like to think that my endorsement of Bob's 2016 nomination to the Board helped elevate him from the pack and secured his election. I cannot and will not alter my high regard and fondness for Bob. On May 29, 2019, I published in part the following in the "Securities Industry Commentator " http://www.rrbdlaw.com/4608/securities-industry-commentator/:
Bill Singer's Comment: I proudly support the candidacy of Small Firm Governor Candidate Robert A. Muh and urge all members of FINRA's Small Firm community to support his candidacy.
Robert A. Muh is a candidate for the 2019 FINRA Small Firm Governor seat. I have tremendous respect and admiration for Bob's intelligence and independence, which prompted my support for his successful 2016 election. Bob is committed to advancing the legitimate needs of smaller firms and has always stood up to speak out for industry reform. Without reservation, I support Bob's re-election as the 2019 FINRA Small Firm Governor and urge all BrokeAndBroker.com Blog readers to press their FINRA Small Firm's Executive Representative to vote for Bob in this year's election.
[July 26, 2019, 3:36 PM Reply from Bill Singer to Kathleen Murphy]Dear Mr. Singer,I am writing as Chair of the FINRA Nominating and Governance Committee to clarify an issue recently raised regarding the membership of this committee. The FINRA website provides information about the membership of the committee. However, for ease of review, I wanted to provide you with that list and the affiliations of the members of this committee:Brian J. Kovack - President, Kovack SecuritiesRochelle B Lazarus - Chairman Emeritus, Ogilvy & MatherKathleen A. Murphy - President, Personal Investing Fidelity InvestmentsHillary A. Sale - Professor of Law and Affiliated Faculty, Georgetown UniversityTimothy C. Scheve - President & CEO, Janet Montgomery Scott LLCLeslie F. Seidman - Former Chairman, Financial Accounting Standards BoardElisse B. Walter - Former Commissioner, SECNo FINRA employee is a member of the committee or has participated in any way in our deliberations regarding the small firm election or our nomination of Bob Muh. The reasons we nominated Bob as a very strong advocate for the small firms are set forth in our letter. It is critical that the FINRA Board has strong, effective and impactful representation from the small firm community. We very intentionally have not sought or been given input from FINRA management or staff about this nomination.I hope this information is helpful.Sincerely,Kathleen Murphy . . .
Respectfully, that all should have been in the Committee's July 25 electioneering email.I too think Bob is a wonderful candidate, which is why I supported him in 2016. The issue in 2019 is NOT Bob's qualification but the Committee's meddling in the Small Firm election by campaigning against another qualified Petition candidate. The fact that you have the right to do something does not make it the right thing to do.As I clearly noted in my article, I could have lived with the mere nomination, as I did, and continued to support Bob. I could not tolerate FINRA taking sides via the electioneering email.As the email you sent noted, many of those who sent it lacked an appreciation of issues pertaining to the Small Firm community and relied upon Bob's considerable expertise in that regard. Perhaps a more attuned Committee would have realized that the July 25th email would stir up old feelings of distrust and mistrust. You did FINRA and Bob no favor in sending that missive. Thankfully, the Small Firm has two eminently qualified candidates running and will be well-served by the election of either.Bill Singer . . .