UPDATE: 2019 FINRA Contested Small Firm Election: Vote for Linde Murphy

July 26, 2019

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).
http://www.finra.org/sites/default/files/notice_doc_file_ref/Election-Notice-071919.pdf

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.
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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: 

ROBERT A. MUH

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.

Education:

B.S.  Massachusetts Institute of Technology

MBA and M.Phil. Columbia University

I can be reached via email at bob@suttersf.com or by phone at 415-352-6310.


Statement of Small Firm Member Governor Candidate  
 LINDE MURPHY

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.  

What does this have to do with the FINRA Board? Since the board is where the rules receive final approval to advance to comments phase and then to be filed with the SEC, small firms suffer if no one speaks strongly and convincingly.  This person must be able to explain and convince many public Board members to support the plight of the small firm.  I will represent you effectively.  

Track Record

I started in this industry in 1999 on an equity trading desk.  I've worked at the executive level as Chief Compliance Officer and Chief Operating Officer, and I know the roles at all levels of the firm as so many of us in small firms do.  I am involved in industry groups, started round tables to help clearing firm correspondents, have been elected and selected for FINRA committees, spoken at conferences, and fight hard for the rights to advance the cause of industry reform.   

After years of work on FINRA committees, I know how the process works.  If small firms do not take the initiative and insist on change, then we will always play defense to the ongoing barrage of rules that are created in response to the acts of large firms or rogue brokers.  
I fight passionately to alleviate the grievances of the small firm community as I've done when I: 
  • Successfully led the charge to limit the availability of your personal information to prior employers. 
  • Argued to allow many small firms across the country to operate under a FINOP exemption they've held for years AND WON!
  • Worked with leaders of national Chamber of Commerce organizations to get our PCAOB Exemption Bill added to their legislative agenda items so they will fight with us! 
  • Continue to fight to allow you to keep your licenses current through continuing education if you take a job in another field or time out of the industry. 
  • Continue to fight against third-party insurance coverage information being disclosed in arbitration.
  • Change the "guilty until proven innocent" opinion of advisors that makes expungements so hard to obtain.     

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 lmurphy@meallison.com.    

Nominations

As you know, my name is on the ballot this year because I went through the petition process to get it there.  Let's not forget the efforts of a small group of dissidents that first contested the FINRA nominee years ago.  They fought for the rights of small firms and against what they felt was a nominee handpicked by FINRA. 

At no point in the future would I accept the FINRA nomination for the Small Firm Seat for the Board of Governors.  The person who represents small firms at the board level should go to the members and ask for their support by signing a petition.   

Action

Let's take the lead together and elect a person who represents the small firm.  A person who will fight to end regulations that don't apply to small firms, reassert the idea for a small firm rulebook, get relief from PCAOB audits (a non-FINRA item, but a critical concern for small firms right now), and fight for other regulatory relief changes that help us grow and prosper.  Does this sound like a tall order?  You're absolutely right.  It is.  And now is the time we should think big, start being proactive and stop being consumed with reacting to the endless demands coming down on us. We need a board member who "gets us" - I am that person! 

Stand with me.  Vote Linde Murphy.

= = = = =

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:finracorporatenotification@finra.org] 

Sent: Thursday, July 25, 2019 12:00 PM

To: 

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. 

Sincerely,

Nominating and Governance Committee of The Board of Governors of FINRA


As stated in Article VI of FINRA's By-Laws:

The Nominating Committee

Sec. 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 Views

Sec. 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.

In addition to nominating candidates, Section 9 above provides that "in the event of a contested election," the Nominating Committee "may" support a governor -- and that sentiment is mirrored in Section 11(b). "May" does not mean "shall," and given NASD/FINRA's history of antagonistic relations with its Small Firm community, it is inappropriate for the self-regulatory-organization to interfere in a contested election involving a Small Firm Member Board election. As far as I am concerned, the only proper role of any nominating committee is to "nominate," and, thereafter, to allow the members to vote without further interference from that committee. I consider the Nominating Committee's July 25th email as a clumsy and transparent attempt by FINRA, acting through its Nominating and Governance Committee, to influence the Small Firm Member Board of Governors election. 

I have long criticized FINRA's penchant for hide-and-seek when it comes to identifying culpable parties in its various published decisions and settlements; and the Nominating Committee's email is just another example of such obfuscation. Not set out in the email are the names and affiliations of the "three industry governors and four public governors" who purportedly authored and authorized the email. Who are these folks? What firms do they work for? What organizations are they involved with? There is hardly a press release that emanates daily from FINRA that does not disclose the name and role of someone. Given the gravity of the July 25th email's purpose, it seems cowardly for the authors not to have inserted their names and affiliations into the communication. What did they expect -- that readers would pursue online searches to try and pierce this veil of anonymity?

The email asks us to accept as an article of faith that "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." Amazing bit of alchemy that assertion! Three sitting industry governors and four sitting public governors are not "from" FINRA and notwithstanding these seven Board members' misplaced activism on behalf of a candidate for a Board seat, FINRA is not participating "in any way." 

Why, you may ask, does all of the matter? 

Some 23 years ago in August 1996, the Securities and Exchange Commission issued its historic condemnation of FINRA's predecessor-in-interest in "Report Pursuant to Section 21(a) of the Securities Exchange Act of 1934 Regarding the NASD and the NASDAQ Market"  https://www.sec.gov/litigation/investreport/nasdaq21a.htm. Set out in the Appendix to the 21(a) Report https://www.sec.gov/litigation/investreport/nd21a-appx.txt, is this sordid history (See Page 99 of the 21(a) Appendix):

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.-[231]-

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.

For further content and context about the self-regulator's interference in the 1994 election, read, "Former NASD Board Candidate Says Group Undermined His Bid" (Wall Street Journal / November 19, 1996) https://www.wsj.com/articles/SB848363669862588500. For those who might presume to lecture me as to the facts and circumstances of the above lawsuit, I would suggest you take very careful note as to the name of the law firm that represented the Plaintiff and sued NASD. Finally, just by way of a refresher course for FINRA, the Rudman Report admonished in part that 
http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=1872:

District Committees

(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.


As recently as June 17, 2019, I published in part in "2019 FINRA Board Of Governors Election" (BrokeAndBroker.comBlog) http://www.brokeandbroker.com/4649/finra-board-election/:

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.

Upon learning in May 2019 that Bob had been nominated by FINRA's Nominating Committee, I informed Bob that I thought it ill-advised for him to accept that nomination and warned him that many in the FINRA Dissident/Reform Movement might be troubled by that development. Notwithstanding, as my public support evidences, I renewed my support for Bob's re-election. Despite holding my nose and closing my eyes, I cannot overlook FINRA's interference in the 2019 Small Firm Member Board race as manifested by the Nominating Committee's email. I am tortured by having to choose between supporting Bob's re-election or withdrawing my support in order to preserve my own integrity. In the end, heart-wrenching as this decision is, I must withdraw my support for Bob and urge all eligible Small Firm Executive Representatives to vote for Linde Murphy. The FINRA Small Firm community must send a clear and unequivocal message to FINRA to "remain strictly neutral" when it comes to Small Firm politics. 

Among the first order of business after the 2019 election results are certified should be the authorization by the FINRA Board of Governors of an independent, outside investigation to determine whether FINRA "staff and leadership" recommended that the Nominating Committee draft and publish the email supporting Robert Muh's contested candidacy. Further, the investigation should determine who drafted the email with a focus on whether any FINRA staffer or outside consultant/agent did the scrivening. Finally, the investigation should determine whether any FINRA funds were used to pay for the preparation and dissemination of the July 25th email. I urge Small Firm Governors Stephen A. Kohn and Paige W. Pierce to raise these issues during the next Board meeting.

UPDATE: July 26, 2019 

[July 26, 2019, 12:16 PM Email from Kathleen Murphy to Bill Singer]

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 Securities
Rochelle B Lazarus - Chairman Emeritus, Ogilvy & Mather
Kathleen A. Murphy - President, Personal Investing Fidelity Investments
Hillary A. Sale - Professor of Law and Affiliated Faculty, Georgetown University
Timothy C. Scheve - President & CEO, Janet Montgomery Scott LLC
Leslie F. Seidman - Former Chairman, Financial Accounting Standards Board
Elisse B. Walter - Former Commissioner, SEC

No 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 . . .

[July 26, 2019, 3:36 PM  Reply from Bill Singer to 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 . . .