October 17, 2020
From my perspective, FINRA is an inept and frequently ineffective regulator, which I have long characterized as the lap dog of its larger member firms. Frankly, FINRA comes off as little more than a hijacked trade-group intent on eliminating its smaller members and promoting financial superstores and regional brokerages. Harsh words? Absolutely. Off the mark and unfair? I think not.
That great American jurist, Bob Dylan, once mused "But something is happening here and you don't know what it is. Do you, Mr. Jones?" Frankly, sage words for these pandemic times -- and equally appropriate for a FINRA AWC that wound up in state court and two federal courts. The respondent was barred by FINRA for failure to testify during a second on-the-record interview. Why did he refuse to appear? Ummm, that's not completely clear. Were there any mitigating factors? It appears so. Were they considered? Perhaps but ultimately the respondent entered into a settlement whereby he was barred for his conduct. So, you know, why did he settle for a Bar when he could have testified at the second hearing or pursued his administrative remedies? Again, I'm not quite sure what happened or what was going on. See for yourself.
In today's featured FINRA regulatory settlement, we come across yet another in a seemingly endless line of so-called Outside Business Activities ("OBAs") cases. In fairness to FINRA, the OBA protocol is fairly straightforward: A registered rep who wants to engage in OBA is required to notify his employer. At that point, it's up to the employer to evaluate the proposed OBA and decide whether to allow it, deny it, or modify it. That much of the rule is about as simple as it gets. The larger question is what gives an employer or an industry's self-regulator the right to proscribe what outside activities an employee may engage in.