August 7, 2021
FINRA's expungement process seems more toll-booth than a fair alternative to the courtroom from the perspective of many industry claimants. In contrast, consumer advocates and industry regulators often complain that FINRA's expungement process is a dangerous laundromat. Sometimes you just can't please anyone. A recent FINRA expungement offers an example of how things work best from an associated person's perspective.
Another day and another FINRA regulatory case against a rep who applied for an Economic Injury Disaster Loan from the SBA. Ho hum. Yet again, FINRA seems to have the respondent dead to rights. The facts are what they are and FINRA makes its case. It's in the making of that case, however, that FINRA's choice of words and its highlighting of some facts gets awkward. Not only does FINRA appear to operate under a double standard when it comes to the industry's men and women versus the regulator's Large Member Firms, but we also see language in the settlement document that comes off as sexist. Boys will be boys but girls should act like proper ladies?
For decades, NASD and then FINRA have cozied up to the once-powerful market makers and, more recently, to what was once called a "wirehouse" but is now purportedly a "financial services company." Call it what you want. We're talking about a cluster of economic power and a consolidation of political influence that commands the waves to stop. And at FINRA, those waves do, indeed, stop. My expectation -- my fear -- is that FINRA will not fully apply the Restricted Firm Rule but will only focus on the usual suspects: The heirs to the sordid traditions of boiler rooms and pennystock hustlers. What will not blip on FINRA's Restricted Firm radar are its Large Member Firms -- the newfangled financial services companies. No, those firms will never be deemed to to have a qualifying "history of misconduct."