Unwavering Commitment to Market Integrity
As FINRA Nominating and Governance Committee Chair Murphy so aptly affirmed, the Chair of FINRA's Board must have an "unwavering commitment to investor protection and market integrity." How then does that commitment to integrity comport with shocking revelations that during Eileen Murray's tenure as the Co-CEO of Bridgewater Associates, that her firm filed a lawsuit against Minicone and Squire during which the company "filed its claims in reckless disregard of its own internal records, and in order to support its allegations of access to trade secrets, manufactured false evidence . . . [and] did not have a reasonable basis for filing its claims . . ."?
A Gerrymandered Board that Disenfranchises 91% of FINRA's Member Firms
It may well be that Murray had no role whatsoever in any of the sordid details attendant to
Bridgewater v. Minicone and Squire; however, it is a fair question to ask whether FINRA's Nominating Committee (which has no representative from over 91% of the organization's membership!) was aware of the issues raised in the lawsuit and whether they vetted same with Murray during the consideration of her for the role of Chair. Consider my recent
comments from "Securities Industry Commentator" (July 1, 2020) http://www.rrbdlaw.com/5300/securities-industry-commentator/#murray :
https://www.finra.org/media-center/newsreleases/2020/eileen-murray-elected-chairperson-finra-board-governors
The FINRA Board of Governors unanimously elected Eileen Murray, former Co-Chief Executive Officer of Bridgewater Associates, LP, as Chairperson to replace the departing William H. "Bill" Heyman. Also, Maureen Jensen, former Chair and Chief Executive Officer of the Ontario Securities Commission and Eric Noll, Chief Executive Officer of Context Capital Partners were appointed to the FINRA Board as public governors, effective at the August Annual Meeting.
Bill Singer's Comment: As I have long argued and will so persist, FINRA's Board of Governors is a non-representative entity nurtured by an indefensible system of gerrymandering whereby over 91% of the organization's member firms (those designated as "Small" and defined as having at least 1 but no more than 150 registered representatives) are restricted to only 3 of 24 seats (less than 13% of the organization's membership). Worse, FINRA's Nominating and Governance Committee, which nominates candidates for Governors, does not have one Small Firm Governor among its seven member committee https://www.finra.org/about/governance/standing-committees
With the exception of Small Firm Governor Stephen Kohn, who is now seeking re-election to a second term, I know of no current Governor who is aggressively supporting efforts to seat a Small Firm Governor on the Nominating Committee.
Given FINRA's social engineering of its Board and key Committees, and given the ongoing demise of FINRA's overall membership, I refuse to afford this so-called self-regulatory-organization any legitimacy and continue to call for its decertification. Consequently, while I welcome the election of Eileen Murray as Chair, I urge her to rectify the outrageous lack of fair representation on FINRA's Board and Committees.
What Did You Know and When Did You Know It?
Inevitably, I must ask -- indeed, all Wall Street reform advocates must wonder -- whether FINRA's Nominating Committee knew about the AAA hearing panel's finding of fabrication of evidence that occurred during the new Board Chair Murray's term as Co-CEO of Bridgewater.
If the Nominating Committee knew of the allegations/findings about fabricated evidence, was that disclosed to all FINRA Board members before they voted to approve Murray's nomination?
If the Nominating Committee did not know about the fabricated evidence issue, shouldn't Murray have disclosed such facts during the vetting process given that FINRA is Wall Street's leading self-regulatory-organization?
If the findings of the AAA hearing panel are correctly reported by the press and are accurately set forth in the pleadings cited above, we have a grotesque example of hypocrisy whereby an investment management firm knowingly and intentionally manufactured evidence in a lawsuit that said firm brought against two former employees. Given those sordid facts, FINRA should have inquired as to whether Bridgewater's former Co-CEO knew about (or sanctioned) any of the alleged misconduct -- or, in the alternative, if Murray was not even in the loop about the lawsuit. Keep in mind that the only reason that we know about the lurid allegations is because former employees Minicone and Squire were compelled to file a motion in court in order to force Bridgewater to comply with the AAA order to pay legal fees. Inexplicably, Bridgewater's intransigence invited the attachment to Plaintiffs' Petition of all the confidential AAA arbitration documents and the references to the unflattering criticisms by the Panel.
Again, the question that most lawyers would ask of FINRA's Nominating Committee is "Did you know of Bridgewater's alleged fabrication of evidence against two former employees?"
Wouldn't you ask a candidate for the Chair of FINRA's Board if there is anything in your background that could prove embarrassing to FINRA?
If the Nominating Committee knew of the fabrication of evidence, why did they decide to overlook that issue when recommending Murray's appointment? Was that issue presented to all sitting Board members before they voted in favor of the appointment?
If this issue of Bridgewater's manufacturing of evidence during the AAA arbitration is now a surprising revelation to the members of the Nominating Committee and the sitting Board members, will they rescind the appointment, or ask Eileen Murray to respond with a full written statement to be provided to the sitting Governors and published on FINRA's website?
Uneven Regulation
The issues of Bridgewater's alleged bad-faith lawsuit and what its Co-CEO knew (or didn't know) are relevant because FINRA routinely charges member firms and associated persons with failing to abide by conduct consistent with just and equitable principles of trade as promulgated under
FINRA Rule 2010 https://www.finra.org/rules-guidance/rulebooks/finra-rules/2010. One would think that the fabrication of evidence in furtherance of a lawsuit filed by any member firm or associated person would certainly not be deemed just and equitable conduct. Why would such conduct be sanctioned if undertaken by a hedge fund?
If such conduct was sanctioned or tolerated by any firm's Chief Executive Officer, how does that individual then obtain an appointment as the Chair of Wall Street's leading self regulator?
If FINRA was unaware of this issue, then what does it say of the regulator's investigative practices?
If the Nominating Committee knowingly failed to disclose this issue along with its nomination of Murray as Chair, shouldn't the entire Committee be removed?
If the Committee was unaware of this issue, what, if any, role did Murray play in deflecting such an inquiry?
In fairness to FINRA Chair Murray, I urge her to direct the Board to retain an independent, outside investigator to look into the many issues that I have raised and to prepare a report to the Board. Such a report may rebut all of the troubling questions raised in this article, and I would accept such findings. On the other hand, if the report lambastes FINRA's Nominating Committee, then I would demand the discharge of all members and insist upon a rule change that requires the seating of at least one Small Firm Governor. For my part, I hope that the publication of this article will prompt FINRA Small Firm Governor Stephen Kohn to once again wage a lonely battle on behalf of industry reform and regulatory fair-play.