The Merry-Go-Round of FINRA Reform. This Time It Won't Be Any Different Again

September 6, 2017

Here we go again. FINRA says that it's going to listen to you. The self-regulatory organization promises. Reform is coming. Fairer regulation is coming. More effective pro-consumer industry oversight is coming. This time, FINRA says, it will be different. Sure, this time it will; except, you know, the last "this time" when FINRA said it was going to be different, turns out, it wasn't. 

If you read all the breathless press releases coming out of FINRA lately, the air is ripe with anticipation. FINRA is inviting us to tell them (yet again) what's wrong and what needs fixing. Armed with all this solicited advice, FINRA will likely impanel committees and hold roundtables and create working groups in order to consider all the ideas and suggestions. After the deliberations, I suspect we're going to be regaled with lots of progress reports about how various proposals are being drafted into formal rules. Of course, next comes the endless varieties of status reports, which are mainly clever devices to cover the fact that nothing has actually gotten done but, hey, we want you to know that we're working on it, tirelessly, and we're on top of all this reform stuff. After a year or so of drafting, revising, amending, commenting, further revising, further amending, more commenting, and a final draft, the whole shebang gets submitted to the Securities and Exchange Commission, where yet another round of masturbatory bureaucracy will delay and further dilute and send back an approved version that is likely unworkable but, not to worry, by the time we arrive at this stage there will be a new cast of characters at FINRA (or whatever the regulator will be renamed at that point).

Does anyone know where the lever is to stop this idiotic merry-go-round?

Nothing ever changes -- at least not for the better. And by "better" I mean in tangible ways that offer more substantive protections for the investing public and more effective, fairer regulation for the industry. Why? In my opinion, it's because behind the scenes, the same withered hands are pulling the strings and the same co-opted interests are still calling the shots. The goal is not about accomplishment: the purpose is spectacle. We get pageantry without change. Those in power prefer it that way. When you have six- and seven-figure salaries dependent upon the status quo, why risk altering the landscape? 

Of course, along with these paroxysms of this time reform proposals, we find that there are lots and lots of published articles in which various industry figures are interviewed and asked to weigh in on the exciting news coming out of FINRA.  If you compare the recent crop of news coverage about FINRA, you won't find much difference from those published a few years ago or even a decade or more. The names of some of the folks interviewed change but, at its core, it's all little more than a tired rehash of the same complaints and the same suggestions. Just as nothing truly changes at FINRA, nothing truly changes within the industry. Folks grouse. They complain, They threaten to take action. As we all know, however, after the articles get framed and nailed up in an office, that's about the extent of all the angry talk. 

As a founder of the NASD Dissident Movement, which became the FINRA Dissident Movement, I have watched this nonsense for two-plus-decades. As a card-carrying grouser, complainer, and threatener-of-action, I play my role in this play. Frankly, I too sleepwalk through my lines and my passion for the drama is waning. 

Let me pull out some yellowed clippings of my past performances. You will note in some of the re-posted Blog articles below that some content is over a decade old. Some of the material is so old that it references the  NASD, which has come and gone and now we're confronted by FINRA. 

Also READ:

"Bill Singer Submits Rare FINRA Comment" ( Blog, June 1, 2017)

"Wall Street Critic Bill Singer Revisits His 2009 Reform Proposals" ( Blog, April 22, 2016)

"End The Politics Of Wall Street Regulation: Decentralize FINRA And The SEC" ( Blog, November 16, 2011)

= = = = =

as first published on September 8, 2006

The NASD should create an Office of the Industry's Advocate (OIA), which would be charged with advocating the interests of both NASD members and registered persons. I have advocated this concept for nearly a decade, as reported in the press and set forth in a number of articles I have authored. For a reference point, please consider the role of the National Taxpayer Advocate (NTA), who is appointed pursuant to federal statute by the Secretary of the Treasury and reports to the Commissioner of the Internal Revenue Commission. I would specifically refer you to which is the July 26, 2006, Senate testimony of NTA Nina E. Olson.

NTA Olson begins her testimony (written statement) by noting four reasons that compel the IRS to enhance efforts at voluntary taxpayer compliance (rather than over-reliance upon enforcement):

1. Enforcement is best suited for willful violations and most taxpayers' errors are inadvertent;
2. Public policy prefers voluntary compliance rather than enforced;
3. IRS' limited resources are already strained by its current enforcement agenda; and
4. "harsh enforcement measures against inadvertently noncompliant taxpayers may increase distrust of the IRS and create deliberate noncompliance."

As NTA Olson's testimony demonstrates, the NASD's problems are not unique; likely all regulatory organizations experience tension within the dynamic between regulator and regulated. OIA should not be viewed as a Trojan Horse ominously standing outside the NASD's gates. To the contrary, if properly implemented and utilized, OIA would reduce (if not eliminate) much of the trench warfare that has characterized the past decade's relationship between the NASD and its industry critics.

As I envision the OIA, it would have a national office in New York City --- to underscore its roots in the "business" rather than in the "regulation" of the NASD community. This separation of offices from NASD/Washington would stress the OIA's independence from the regulatory-side of the SRO. The Director of the OIA (DOIA) would have observer status on the NASD Board. The OIA would issue an annual report card on each district and various NASD divisions, and would issue an annual report on regulator/regulated relations and issues. There would be an annual election at each district for a District Industry Advocate (DIA), who would serve as a local contact for the receipt of industry complaints and suggestions. The DIA would use his or her knowledge of the district to mediate staff/member disputes and suggest improved policies and procedures. For those matters not amenable to a district-level resolution, the file would be transmitted to the DOIA.

OIA should also be used as NASD's "referee" for purposes of ruling on scheduling disputes during investigations, examinations, and OTRs. Pointedly, I am not suggesting inappropriate interference with "regulatory" prerogatives but would limit such OIA rulings to purely procedural issues such as the disputed timing of production or the disputed selection of the location/date/time of OTRs. Hearing disputes should remain within the province of the Office of Hearing Officers.

Why does NASD need an OIA? First and foremost, the NASD's role has dramatically changed since the 1930s when the idea of a self-regulator was developed and implemented. Frankly, NASD is no longer a "self" regulator in the sense that Wall Street regulates the securities industry. To the contrary, NASD has subtly transitioned into what is more properly termed a "private-sector regulator" in that far more diverse interest groups than a national association of over-the-counter securities dealers are involved in regulating the conduct of the association's members and associated persons. A fortunate consequence of that expanded constituency is that NASD now champions the interests of public investors, public companies, registered investment advisers, broker-dealers, registered persons, investment companies, etc. An unfortunate consequence of that same expanded constituency, is that NASD has become less sensitive to the needs of its members and their associated persons. The most unfortunate consequence of NASD's new role is that an entrenched bureaucracy of regulators (often without significant industry experience) tends to dictate rules and agendas, whereas such prerogatives were once shared with the regulated.

Wish as it might, the securities industry cannot turn back the clock and other marketplace participants will simply not stand for such a reactionary move. As such, it is necessary to accept that NASD is no longer a partner in the self-regulatory process but now an outside regulator - and reports of plans to merge with the New York Stock Exchange's regulatory arm only underscore the ongoing nature of that transformation. Consequently, the industry desperately needs to have some spokesperson at NASD in the form of OIA, which will monitor proposed rules, consider complaints of Staff misconduct, and ensure that a zealous advocate is always arguing for fair and reasonable regulation and enforcement.


Becoming Part Of The Solution July 28, 2009 by Bill Singer

I've noticed a pick-up in the numbers of complaints about all things Wall Street and its proposed reform -- present company included. The din of contrary opinions and naysayers has risen to the level of a roar, and while it would be nice to say something complimentary about all of that grumbling, frankly, it strikes me as just a lot of whining. And, yeah, you're right, I'll include myself among the grousers.

It's time that we started drawing the line -- the one that separates those who are part of the problem from those who are part of the solution. If you just want to complain and have nothing substantive to offer by way of reform, stand over there. If you have some constructive ideas, stand over here.

You know the old saying: You're either part of the solution or you're part of the problem. Well, that's where we have arrived.

As an interesting aside, I'll bet many of you use that solution/problem quote but don't know that it was spoken in 1968 by Eldridge Cleaver, the author of "Soul on Ice" and arch '60s activist and former minister of information for the Black Panther Party. Cleaver became a conservative Republican and Reagan supporter in the 1980s. How times have changed: I'm quoting Eldridge Cleaver.

So, getting back to becoming part of the solution, I will offer an eight-point program to reform Wall Street and its regulatory community. The issues that I set forth represent some ideas that have been formulated during my three decades on the Street, and others that were prompted by this most recent industry meltdown. In this first installment, I merely outline my proposal in bullet-point fashion. We'll get into the details in future columns.

Professionalize Financial Services Providers

Uniform Licensing System

Direct registration by individual not firm

Fully transportable registration from employer to employer

Public database using user-friendly interface

Fiduciary Standard 

Protect against dilution of definition by special interest groups 

Restrict (or eliminate) transaction-based compensation 

Full disclosure of compensation by firm and individual 

Continuing-Education System

Two-year program (Compliance/regulatory component; product updates; third-party, industry groups, regulators, and employer providers)

initial certification of individuals to sell each each designated product

bi-annual update module every two-years (limited to materially new product developments or regulatory events)

Implement a uniform regulatory disclosure system on all customer statements 

Establish quarterly updated firm and individual regulatory scores 

Disclose current scores for servicing firm and financial professional 

Implement "point" system (akin to Driver's License) whereby accumulated points result in pre-determined fines and suspensions. 

-Impose annual fee on member firms for their rating (incentive to limit hiring of troubled professionals) 

-Impose annual fee on individual professionals for their rating

Establish a centralized national auditor

Independent "cage"

Issues uniform confirmations and statements

Confirms holdings of securities and cash

Confirms fair valuation or notes issues

Abolish Self-Regulatory Organizations

Federal and state regulators

Institute independent study on feasibility of a private-sector regulator: composed of industry firms, financial service providers, issuers, public advocates and regulators

End Mandatory Customer and Industry Arbitration

Permit voluntary arbitration

Eliminate industry-sponsored arbitration forums as sole option

Create a Fund for Full Payment to Defrauded Investors

Impose fee on all trades

Impose annual renewal fee on firms and financial services providers

Initially allocate all regulatory fines to this Fund (until fully funded)

Require proof of prevailing decision in court or arbitration 

-Limit fund compensation to compensatory damages and reasonable fees/expenses 

-Require proof of insolvency of respondent or defendant

Implement Bounty Program for Whistleblowers and Tipsters

Model after Qui Tam or False Claims Acts

Offer a percentage (sliding scale of between 10% to 33%) of funds recovered

Create a Systemic Risk Monitor (SRM)

Create an online "cockpit" of concentration of pockets of risks

New products should include application to SRM showing anticipated economic impact and proposals to address any potential systemic risk. 

-SRM may object to issuance of new product 

-Implement rapid administrative process to resolve objections or sustain "hold."

Provide for three-step protocol for product or sector:

1. On "Watch" 

-Impose size and monetary limits 

-Establish "tripwires" for escalation to "Alert" status

2. On "Alert" 

-Permits specific regulatory organizations to take steps to review, limit or suspend increases in float, sales, etc.

3. On "Systemic Risk": 

-Authorize a Systemic Risk Czar to take emergency steps 

-Provides for accelerated appeal process


The Death Of The Salesman August 7, 2009 by Bill Singer

How do we begin to undo the damage and set things right? In my last column, I outlined an eight-point proposal to reform Wall Street in becoming part of the solution. Assuming there is still time left to make the changes and the political will to see the reforms through, let's start with one of the most basic elements in the Wall Street equation: the folks who sell you stocks and plan for your retirement.

Too Many Titles

First and foremost, I call for the professionalizing of the role of all individuals providing financial services. It has all gotten too confusing for the average investor (and apparently for the befuddled regulators). We are amid an explosion of titles that suggests that all financial-service providers are well-trained and educated (and of similar expertise) to understand what they are recommending to investors. As recent history has sadly demonstrated, there are far too many con artists, fraudsters, scamsters and financial morons out there masquerading as know-it-alls.

Open a newspaper or magazine, plow through online research or listen to those touchy-feely TV commercials, and you are immediately bombarded with titles: stockbroker, registered representative, financial planner, investment adviser, account manager, financial representative, financial associate. Some of those titles are real, but others are fanciful. We don't need fanciful in this day and age. And we certainly need less confusion when trying to invest our savings or arrange for our old age.

We must implement a comprehensive system that certifies competency and ensures that consumers are not overwhelmed by professional designations. It is high time to separate mere teleservice operators from individuals qualified and certified to answer sophisticated financial questions and provide competent advice. While there may be a place for both rookie cold-callers and skilled financial planners on Wall Street, consumers must know which is which when dealing with brokerage firms, investment advisers, financial planners, banks and insurance companies.

The Financial Services Professional (FSP)

In furtherance of that approach, I urge the implementation of a uniform licensing model. For starters, most financial professionals should be required to pass an entry-level examination that tests for basic knowledge of the building-block financial products and the regulations governing their sale. You pass that test, and you are entitled to bill yourself as a Financial Services Professional (FSP).

Once you have that base title, the FSP has to earn the right to sell more sophisticated products, or offer more sophisticated services. Just as folks looking to hold themselves out as Certified Financial Planners (CFPs) must study, gain certification, and abide by professional rules, we should look to extend that form of certification. We should implement a system whereby the right to sell specific financial products requires the passing of product-specific examination with attendant continuing education obligations. If you haven't passed the test and don't maintain your continuing education credits, then you lose the right to use the titles and engage in the product solicitations.

Accordingly, we must create a rigid system by which FSPs disclose to the public their specific product/service qualifications: everyone uses the same title and only that title. You pass the options certification, perhaps you can note on your business card or during presentations that you are an FSP with the additional designation of an Options-FSP -- but that's it. No options specialist or options investment counselor. One size fits all.

At present, hundreds of thousands of registered folks generally are registered with their firm, and that firm then submits the registration applications to a regulator. As such, you try to chase down a given FSP, and you get caught in a maze of where they may or may not be registered, and the confusion of what each organization may or may not disclose to you (and how you have to ask for that information).

The next step is to professionalize the career of FSPs, so that they are modeled after similar schemes for doctors, lawyers and CPAs. I am not suggesting that lawyers, doctors or accountants are more professional or better than folks on Wall Street -- quite to the contrary, there are more than enough bad actors in all walks of life. Nonetheless, just as professionals should be afforded some respect for the significance of their qualifications, those professionals should also be expected to conduct themselves in a manner worthy of that respect.

The point here is to celebrate the death of the salesman and not to pillory the hundreds of thousands of hard working and honest men and women who are presently stockbrokers. My goal here is a simple one: To free those employees from the yoke of their employers, and to encourage them to pursue more professional goals than merely opening up new accounts or generating the largest number of commission dollars for the month. Those employment conditions denigrate the importance of FSPs and reduce them to little more than used car salesmen trying to push clunkers off the lot. The investing public needs more honesty than a fast-talking salesman, and those who labor at the many branch offices around our country aspire for more than that pejorative cartoon of a career. As such, yes, I hope that the job of stockbroker becomes an anachronism within a generation and is replaced by a more sophisticated, more fairly compensated professional.

Continuing Education

Wall Street needs a rigorous, comprehensive continuing education system that updates FSPs on all product-related developments and material changes in regulations. As a lawyer, I am personally required to complete 24 hours of continuing education credits every two years. I pay that cost out of my own pocket and attend whatever seminars I choose. We should create a similar system for FSPs. For this CE program to work, we cannot impose time-wasting obligations on FSPs. If there are no substantive new developments in a specific area, say options, during the ensuing 24 months, then the obligation may be fulfilled by a course that reviews recent regulatory issues involving options and perhaps some guidance on developing trends in risk management. We don't want to turn this into a pure revenue-generating device for regulators or professional associations, and we don't want to make professionals feel as if they are merely going through the motions.

Reform the Registration System

As a lawyer, I sat for the bar in 1984 and have been admitted to the practice of law ever since. My license to practice law exists as long as I satisfy my continuing education requirements every two years (24 hours of courses) and have not engaged in any conduct that would disbar me. I don't lose my license if I quit law firm A and join law firm B, which is essentially what happens to most stockbrokers who find their registrations in limbo during periods of unemployment.

Stockbrokers are only deemed registered when they are employed by a member firm, and then have only 24 months to find subsequent employment or their registration expires. That system has given far too much leverage to the employer and has resulted in registered employees pushing unsuitable house product or the lesser-performing funds of a favored affiliate. The more onerous it is to leave a brokerage firm, the more pliable the stockbroker becomes to the demands of his or her employer-and those demands may well pressure the captive employee to do things that are wrong, if not illegal. Think of it this way: Imagine what would happen if you lost your driver's license every time you sold a car or returned a rental. As long as you pass the eye test for your renewal, your license is renewed-and I don't know of any driver's license with a mere two- year life. Am I comparing apples and oranges -- yeah, you're right. But still, this issue is often at the root of much consumer fraud on Wall Street. It has to be changed.

Unified Disclosure Database

Similarly, the public should be entitled to easy access to a single unified database for all FSPs. Additionally, the information provided should not depend upon whether you contact one regulator or another. We need to create a centralized, public database that is easily accessible via the Internet and has a user-friendly interface backed up by a supportive customer service staff.

As a lawyer, I personally welcome uniformity among all professional databases, including those in my profession, in the medical profession and in the financial services community. What's good and fair for one should be the same for all. Further, whatever disclosure is mandated for those in these regulated professions should also be mandated for those who do the regulating -- and I would also urge the inclusion of all elected officials at local, state and federal levels. What's good for the goose is good for the gander. Sunshine is good for all living things.

Fiduciary Standard

In keeping with my call for uniform disclosure, I urge the adoption of a single Fiduciary Standard for all FSPs. We must demand that FSPs work at their employer's company but always for their clients. We must also insist that FSPs are subject to a strict Fiduciary Standard that exalts the client's best interest above all else.

The current Suitability Standard that has held sway on Wall Street for generations must be abandoned. It's just not good enough -- not anymore -- for a financial professional to only have to find something that's suitable for his or her customer. No, the job -- the profession -- must demand more. It must demand that you find the very best that you can for your client, and that you never, ever consider how much goes into your own pocket when recommending investments.

As a wizened Wall Street veteran, I know that he who controls the drafting of the rules controls the regulation. A fiduciary standard for a CFP may be quite different from that of an investment adviser, and quite different again from that of a stockbroker. Worse, I am already seeing signs from brokerage industry interests and their cronies that the battle for defining the Fiduciary Standard may well be riddled with conflicts of interests and competitive concerns. We may get a Fiduciary Standard that is so watered down as to not be all that different from the current Suitability Standard now in effect at broker-dealers.

This is a fight worth waging. Today, your stockbroker is only required to recommend buys and sells that are suitable for you -- not necessarily in your sole best interest. Other financial professionals are subject to the more stringent Fiduciary Standard -- recommendations are made by folks acting in the role of your fiduciary, with an obligation to find the best bang for your buck and not something that pretty much fits the bill but puts more fee or commission dollars in their pockets.


The present compensation system on Wall Street is essentially one based upon the more I sell to you, the more I make. Look where that has dragged us.

As long as Wall Street is largely based upon transaction compensation; i.e., stockbrokers earn a commission for every buy-and-sell ticket, the conflict to churn accounts and to push pricey product will remain. Many brokers avoid the temptation and do right by their clients, but the overwhelming corruption of this compensation system is simply too much to be tolerated.

One alternative is to pay salaries to FSPs in lieu of commission-based compensation. Another option is to pay a percentage of the profits in an account or the increase in assets under management. Some of these alternatives are already the favored practice among some FSPs, but the commission system is stubbornly embedded in the broker-dealer community.

Regardless of the compensation structure, every daily confirmation, every monthly statement and every annual account statement should clearly set forth the full compensation earned by the firm and the servicing professional, and further set that data out as a percentage of the overall cost. Customers should be fully informed of the incentives that existed and that may have prompted the recommendation. Similarly, if a customer wishes to offer additional compensation to a financial service professional, such private arrangements should be permitted provided that they are filed with a regulator and approved.


Bringing Consistency To Wall Street
August 14, 2009 by Bill Singer

During my three decades on Wall Street, I worked as a regulatory lawyer prosecuting brokers and their firms; as an in-house industry lawyer; and as a private practitioner representing both the industry and public customers. Having worked those three sides of the table, I have an unusual perspective of Wall Street's players and their games -- and a keen understanding of where the root causes are for many things that serve to confuse and ultimately defraud unwary investors. Among the worst such mechanisms of obfuscation are the confusing numbers of documents that are routinely sent to public customers by financial services companies.

How Much?

The ability to take a simple fact, such as how much your monthly phone or cable bill is, and to present it in a manner that seems to justify charges far in excess of what that glib salesperson told you they would be, and to set forth the component costs and charges in such a way that few human beings have the life span to break the apparently impervious code, has become an art form.

Nowhere is that art more cultivated and appreciated than within the halls of banks, insurance companies and brokerage firms. And heaven help you if you dare to call up to inquire about any item, much less to actually complain. More likely than not, you are talked to as if you were a crook or moron, and you are given a runaround that is typically replete with disconnected transfers to supposed supervisors and promises of follow-ups that never materialize.

Why is this customer service (or disservice) dangerous -- and no laughing matter? Because many Wall Street frauds are furthered and assisted by trade confirmations and monthly statements that are far too daunting for the average consumer to clearly understand and efforts to seek the industry's help in resolving disputes seem eerily reminiscent of a Kafka novel.

It is time to implement a uniform format for trade confirmations and customer statements, and to impose such a guideline on all companies within a given financial service sector; e.g., the same layout and data for the same document for all banks, for all insurance companies and for all brokerage firms. About the only difference we should tolerate is the logo atop the documents. Period.

Wall Street Point System

Way back in 1996, I suggested in a Dow Jones News Service article, "Lawyer Proposes Disciplinary Point System for Brokers," that Wall Street implement a "point system" whereby stockbrokers would be rated on a scale similar to that used in many states for wayward motorists. For each class of infraction, a Financial Service Professional would earn X points. If an FSP accumulates a given number of points within a defined period of time, certain sanctions would automatically be imposed; e.g., he or she would be required to take remedial classes or he'd have his license suspended or registration revoked.

Coming up with the point system and the grid indicating what earns what may be daunting, but it's not rocket science, and I am confident it can be accomplished. Given that we utilize such a system for drivers in all states, It's not as if my proposal is a radical solution. I'm sure if you gave me an empty room and let me pick some regulators, public investor advocates and industry advocates, we would be able to propose a fair system.

Note that I am not suggesting this point system in lieu of the extensive enforcement and disciplinary rules already on the books of federal, state and self-regulators. I propose that we augment that enforcement and disciplinary system by creating a more simplified early warning system. Moreover, I am urging the implementation of the point system so investors will have an easy means of determining the caliber of the firm and FSP they are dealing with.

In addition to using the point system to better notify customers of the compliance history of their potential broker-dealer (BD) and servicing FSP, I would also use the points to create an additional revenue stream to enhance regulation. For each accumulated point during a 24-month period, a broker-dealer and an FSP should be required to pay a given annual assessment into a fund with its primary purpose as source of a guaranty of an financial award rendered in arbitration or court to any defrauded investor, provided that the prevailing investor demonstrates the inability to collect any compensatory awards against a broker-dealer or FSP.

An indirect benefit of the annual fees per point would be to provide a financial disincentive for a BD to hire or retain FSPs with voluminous points, as such points add to the financial burden upon the BD's own point score.

I would then mandate that the 24-month industry average point score for all similarly situated firms and FSPs be calculated monthly. I would require that such industry averages be prominently posted on the uniform account documents I proposed above, and that the current score for the servicing financial services firm and the FSP be displayed alongside.

I can't think of any data that would be more dramatic on a daily trade confirmation or account statement, than, say, the presentation of a regulatory point system with 0 indicating no issues and 100 indicating disaster. Imagine the impact on a consumer of the stark disclosure that the average firm's regulatory point rating for the past 24 months is 21 on scale of 100, and the average FSP's rating is 32 on a scale of 100, but your broker-dealer's number is 87 and your FSP's is 92. What could be simpler and more effective?

For extra measure, I would require immediately adjacent to the point system disclosure the display of the direct phone number and e-mail address for the compliance officer overseeing your servicing FSP, along with the direct phone number and e-mail address for all state and federal regulators overseeing your servicing broker-dealer and FSP.

The Buck Stops Here -- Literally

Separately, we need to consider the creation of a centralized national auditor -- an independent Wall Street "cage," as it were - where all securities and funds would be held subject to verification and confirmation. We need to take all steps possible to ensure no recurrence of a Madoff scenario whereby customers are sent statements referencing fictitious holdings or false pricing of positions.

Toward accomplishing this critical safeguard, I would create a national clearinghouse that would be charged with ensuring the existence of (and confirming same) of any representation on any statement. This clearinghouse should be required to maintain a national database where customers could log on with a user ID and password to access the confirmed and audited status of their account around the clock. That will act as a critical back-up confirmation. Customers should be warned to immediately report to the national auditor any discrepancies.


Decentralize FINRA And The SEC
( Blog, November 16, 2011)

On November 15, 2011, I delivered the afternoon Keynote Speech at the Fall Symposium of the National Association of Independent Broker Dealers (NAIBD). The topic of my remarks was "The Failed Partnership Between Wall Street's Regulated and Regulators."

Frankly, I found the moment an awkward one. For much of the last decade from my perch in what was referred to as the NASD Dissident/NASD Reform/NASD Dissident-Reform Movement (and now known by the preamble of FINRA), I have banged heads with NAIBD. That my shadow crossed over the threshold of one of that organization's events was as much a surprise to me as a likely uncomfortable shock for some in attendance.

On the other hand, it is only from the clash of ideas in the marketplace that innovation emerges, and as readers of my columns know, I love robust debate and a frank, blunt exchange of ideas - provided it's civil and done in the spirit of testing one's core beliefs with an openness to a change of opinion and position.

Below is the version of my remarks as contained in the script that I used during my speech. As with any lawyer, I edited as I went along - some things were left out and some things were expanded. Nonetheless, as raw and honest as is possible, here's what I said:


Good afternoon. As you've likely figured out from the promotional material for today's program and from that introduction, my name is Bill Singer. Yes, I know, I'm much older and shorter in person. Frankly, it's not that big a mystery. The photo that I use for my websites, and for my Forbes and Registered Rep magazine columns is about ten years old.


As the program notes indicate, I've chosen a cheery, upbeat topic for my speech: The failed partnership between Wall Street's regulated and regulators. My intent is that my remarks be received in a constructive manner, but I warn you - these are difficult times and I have no desire to be mistaken for a cheerleader or a face-painted fan in the stands. For some two decades, I've been on the field, tackling and getting tackled, and I've seen enough penalty flags thrown to last a lifetime. So, put on your pads, strap on your helmet. The Halftime Show is over.


At its high water mark around 1999, there were nearly 6,000 member firms in what we used to refer to as the NASD member firm community. By 2006, after the Tech Wreck, after 9/11, and after the IPO scandals, the NASD membership was down to about 5,000 firms. Then came The Great Recession, Stanford, Madoff, Bear Stearns, Lehmann, AIG, TARP, and, life as we knew it pretty much ended.

Last I looked, the newfangled FINRA membership is about 4,500. How much devastation is that? Do the simple math, for every 6 of you sitting here today, imagine that in another decade about one or two of you will be gone.


Today, FINRA is a house divided against itself. We have arrived at this abomination not by accident but by what I view as the social engineering done to reinvent FINRA as an organization of financial superstores and large regional firms - and this has been accomplished to the detriment of FINRA's Small Firm community and with the complicity of larger member firms; former and present NASD/FINRA board members, executives; and more than a handful of industry cronies.


Pursuant to Article I of FINRA's By-Laws, FINRA's Board has been intentionally divided into three separate constituencies:

* Large Firms employing 500 or more registered persons
* Mid-Size Firms employing 151 to 499 registered persons
* Small Firms employing a maximum of 150 registered persons.

Using that small, middle, and large firm formula, the FINRA Board is now a gerrymandered disgrace of 22 members, that seats:

1 Chief Executive Officer of FINRA;
11 Public Governors;
1 Floor Member Governor;
1 Independent Dealer/Insurance Affiliate Governor;
1 Investment Company Affiliate Governor;
1 Mid-Size Firm Governor;
3 Large Firm Governors; and
3 Small Firm Governors

FINRA's May 3, 2011 Election Notice informed us that there were 4,189 small firms and 173 Large Firms.

I find those numbers intriguing.

There are over 24 times the number of small firms as there are large firms. Small firms represent about 90% of FINRA's 4,500 members. So, how many votes on FINRA's Board do the 4,189 small firms have? Three votes - the same number of votes as 173 large firms. Given that there are 24 times as many small FINRA member firms as large ones, the small firms should have 72 votes versus the large firm's 3.

Then there's that ticklish fact that 90% of FINRA's member firms are small firms. As such, given that there are 22 Board seats, the small firms should have something like 20. Instead, the small firm community has only 3 seats.


Alas, life isn't always fair and FINRA has often been a testament to that fact. A self-regulatory organization that was founded by smaller, dynamic firms, has abandoned its founding members and now caters to the needs of a minority of larger firms. Instead of truly proportional representation and input at your self-regulatory organization, small firms are marginalized. Worse, you lack the tools to undo that bias because the SRO that you helped create, support, and grow views you as a nuisance rather than its lifeblood.

During the Great Depression, Will Rogers said that "If stupidity got us into this mess, then why can't stupidity get us out of it?" In recent years, I have looked at Wall Street and often wondered the same thing. The heart and soul of FINRA, you members with fewer than 150 registered persons have sat by as your influence and input was diminished by regulations and regulators seeking to tear down your business. FINRA, a Too-Big-To-Work self regulator paved over the empty space you left behind and built a Wall Street landscape with toweringToo-Big-To-Fail financial supermarkets.  Sadly, the reconstruction was flawed, the contractors and their materials shoddy, and that lovely new Wall Street is now falling apart at the seams.

The small fry, the little guy, the mom-and-pops - you all watched for too many years as larger broker-dealers who could afford to employ former NASD, FINRA, and SEC attorneys and examiners expanded with seeming ease. It took you, a smaller firm, months to get yourMembership Agreement amended to allow for another branch or more brokers or a new product line - but that big firm nearby, the one with the TV ads and the former FINRA exec or the former SEC administrator, well, geez, they just seemed to send in their wish-list and, voila, in a snap they got what they wanted.

Then of course was the explosion in FINRA fines - fines for this, fines for that, fines for inadvertent mistakes, fines for things that no firm used to get fined for. What is the rationale, what is even the point of fining a registered person or a member firm when he, she, or it makes an inadvertent error? As if, what? - that dollar-sign enforcement has been such a success in recent years? 

You small fry get charged with violating Rule X and FINRA wants a $20,000 fine. A large firm with thousands of brokers gets hit with violating the same Rule X and FINRA wants the same $20,000 fine. To some, that flat rate of fines seems fair. However, to those of us in the small firm end of things, we see through that charade and realize it is only a facade of fairness.

First off, the too-big-to-fail FINRA member firm that failed and is now part of a too-big-to-fail bank holding company never actually pays those $20,000 fines out of its own pocket - no, if that member is a publicly traded company, the fine is actually paid by the public shareholders. All of which fosters a mind-set at larger firms that since the bucks don't actually coming out of some human being's pockets - hell, fuhgeddabouit.

Then there's that other aspect of the one-size-fits-all fines. The $20,000 fine FINRA takes in an AWC from a big boy doing hundreds of millions in revenue doesn't have quite the same sting as that same $20,000 fine coming out of the bank account of the small FINRA member doing $1 million a year. For the big boys, it's the cost of a day's worth of toilet paper, for you, it's a few months rent.


Meanwhile, the cost of daily compliance weighs heavy upon your shoulders. With every new regulatory initiative comes more paperwork. And with that paperwork comes the need to hire more non-producing folks. And as all the one-size-fits-all regulations pile up, well, you're paying someone to essentially sit at a desk filling out forms that affirm that you're not doing anything that even needed to have the form filled out. You're paying someone to check off "not applicable" or "does not apply."

Meaningful reform is never achieved by simply issuing more rules or imposing higher fines. What's required are more intelligent and workable rules and a system of fines designed to achieve the same impact upon large firms as with small. Moreover, without the willing participation of those regulated, any regulatory regime is destined to fail as an army of unwanted occupation rather than a partner in maintaining fair and honest markets.


FINRA is a monopoly that aspires to the properties of a gas, which as you may recall from High School chemistry, can expand to fill virtually any size container. Lately, FINRA hasn't seen a violation that it didn't want to impose a fine or a suspension for. And speaking of expanding gas, FINRA now eagerly eyes the registered investment advisory sector. Just what the small firm broker-dealer community needs. Your three Board seats will go to two. Your needs will be further buried under a larger stack of papers in some in-box.

As FINRA balloons to thousands of employees and far too many over-compensated executives, the SRO loses its flexibility and becomes even slower to adapt to new challenges. The once vibrant partnership between the regulated and the regulator that was envisioned when the Maloney Act created self-regulatory organizations nearly three-quarters of a century ago - that partnership is dead. And in its place is an ossified, inflexible, ineffective and often incompetent bureaucracy that sees the majority of its membership - you, the 90% - as adversaries.

Through the prism of a rose-colored lens that softens the view of larger firms, FINRA sees unavoidable human error at large firms as an inadvertent mistake; but that same miscue at a small firm seems to get tagged as willful fraud or negligence. The formal regulatory Complaint against the small firm that names the CEO, the FINOP, and the CCO is often in marked contrast to the Complaint against the large firm which assumes that organization is run by robots.

FINRA is no longer about regulation. It is a bureaucracy that has managed to morph into the same creature as virtually all agencies that are based in Washington, DC.


A generation ago, much of America's regulatory and law enforcement operated on what I call the American model of a localized command and control structure. Frankly, it's always been the best way to manage warfare, government, regulation, and criminal prosecutions. Local police precincts, local FBI offices, local US Attorneys offices - you work a neighborhood beat, you get a feel for your turf.

Over recent decades the American way of governing, regulating, and prosecuting has been displaced by what can only be called an old Soviet system of centralized command and control. It's a cancer that has spread throughout our society. It's the belief that some career bureaucrat nestled away from the real world in the political corridors of Washington,DC knows better than those yahoos who live and work in the boonies. And talk to the government workers and regulators who are in the local outposts - you will hear their complaints how how they've lost control and flexibility, how it now takes weeks to get their paperwork reviewed in Washington, DC by some make-work artist. Off the record, in a hushed whisper, they will tell you that things were better when there was more localized control.


It should come as no surprise, then, that I am not here today to praise FINRA but to bury it.

I don't hate FINRA. I hate what it has become because I know what it can be.

But let's not reinvent history simply to bolster my thesis. Few things in life are unblemished. No regulator or business should aspire to sainthood - it is not a practical business plan. FINRA's predecessor, the old NASD, was not without its faults. It was the soil from which pennystock hucksters grew and from which the price-fixing of NASDAQ by the market making community was nurtured. And many of the complaints that I raise about biased regulators and ineffective regulations are always raised by regulated entities and have been raised not merely for years or decades but for generations.

So, no, let's not pretend that when FINRA was the smaller NASD it was better -NASD had its faults, some of which were severe. And let's not pretend that somehow being small automatically imbues a member firm with decency and compliant behavior, it does not.

For all its warts, the old NASD, offered an alternative to the stodgy New York Stock Exchange. In the old NASD community, we had the vibrancy of NASDAQ rather than the increasingly outdated specialist system of the antiquated Floor. The old NASD community was driven by smaller firms with a vision and more oriented to the retail investor than their NYSE counterparts. Notably, the old NASD was built on District Offices and District Committees planted in regions around the country; whereas, NYSE remained a monolithic presence literally on Wall Street.

But that was then and this is now - and now, we must deal with the fact that NASD was hijacked by regulators and members not interested in offering an alternative to the New York Stock Exchange but in seeking to emulate it. In the end, the NYSE is a wasting asset that failed to adapt to the new realities of the marketplace and is in danger of becoming increasingly irrelevant. And that is what FINRA chose as its model. And that is why we are falling down the same slippery slope.


I propose that FINRA be dissolved as it is presently constituted and that we replace this unwieldy bureaucracy with three new broker-dealer self-regulatory organizations:

  • one for firms with up to 150 registered persons; 
  • one for firms with between 151 and 499 registered persons, and 
  • one for firms with 500 or more registered persons.

I submit that three autonomous SROs with their own Boards, their own staffs, their own members, and their own rules is a quick, easy, and effective first-step in fixing the broken regulatory regime on Wall Street. Overnight, we could end the age of one-size-fits-all regulation. Simply breaking up FINRA into its three constituencies would get us back to neighborhood policing and permit each of FINRA's three broker-dealer segments to create rule books tailored to their needs and the realities of their business.

Restoring trust and confidence in the fairness of our industry's regulation would likely rebuild the fractured partnership between the regulated and the regulator. It would eliminate the internecine warfare inherent in this glorified trade organization of FINRA that regulates three differently sized factions according to rules that are too often premised upon a zero-sum game. As presently structured, FINRA regulates in a manner that results in what is good for large firms is bad for small ones, and vice versa. You got round and square pegs but only round holes - and that's stripping a lot of edges off small firms when FINRA tries to pound you into one-size-fits-all regulation.


How did we arrive at our present predicament with a broken regulatory partnership and a patronizing self-regulatory organization? We stand here today trying to deal with the mess that is FINRA because of decisions made a few years ago - and five or ten years from now, we will be deeper into the muck because of decisions that FINRA makes today and that you failed to correct.

By way of example, let me turn the clock back about five years to a September 15, 2006, when NASD posted a job on its Career Opportunities website. More than anything, this posting typifies how we got into this mess. The September 2006 job opening was for a Director of the NASD's new Office of Member Relations. What I want you to focus on is the nature of the job duties. So as to not be accused of making up some of the tortured language in that notice, let me quote directly from the job posting :

Major Purpose of Job:
The Director, Member Relations, assists the Vice President of Member Relations with all aspects of the department's operations. . .

As with all bureaucracies, we start off with the simple premise that the more titles there are in a department, the more important the department sounds. So in the heady days of 2006, NASD was advertising for a Director of Member Relations whose job involved assisting NASD's Vice President of Member Relations. And we all know how this cascades out of control. The Director soon needs a Deputy Director, and that leads to an Assistant Deputy Director, who needs a Deputy Assistant Director, and, of course, once you get to that point, you absolutely must hire an Assistant Director to the Deputy Assistant Director. Of course, when you call any of these folks you get voicemail telling you to press 1 to continue in English.

Further on in the job posting, NASD explains that among the operations that this new Director of Member Relations will perform is to:

facilitate effective feedback loops between member firms and NASD departments to affect positive change. . .

God Bless Washington, DC and all the bureaucracies and little bureaucrats it has spawned. When I see prose such as "facilitate effective feedback loops," I immediately know what's going on. Someone is desperate to make a simple task sound very important and complicated.

For godsakes, who the hell talks like that? Certainly no one who has run a small broker-dealer on a daily basis speaks like that. Feedback loops - fruit loops, what's the difference and why are we even hiring someone at your expense to perform such a job? Speaking of performing that job, here's another nugget from that 2006 NASD Job Posting:

Essential Job Functions:
The Director serves as ambassador to member firms. . .

An ambassador? Okay, so even five years ago our self regulator grudgingly admitted that it viewed its members as foreign entities - not really partners in self-regulation. Of course, I thought that in diplomatic relations, countries exchanged Ambassadors. Where is the ambassador from the small firm community in all of this? And there's more. The NASD Job Notice stated that among the tasks for this new job would be:

* Key message development, including identification of key themes to deliver as well as general talking points for NASD senior management . . .

How nice. This newfangled ambassador would be hired to also focus on identifying "key themes" to deliver. I'm not exactly sure where they were proposing to deliver these key themes but, hey, I'm cranky to begin with. Look, we all know why NASD wanted to hire this Director and why FINRA continues to fill such silly positions. They wanted this Director to be the NASD's snowblower. And the snow job is to give you in the small firm community the touchy-feely impression that someone's listening, someone cares, and someone is working behind the scenes to implement changes in your favor. Yeah, right.

FINRA still doesn't get it. We in the small firm community are not children or idiots. We can see through FINRA's spin and doubletalk. Not only did NASD publish this nonsense of a job opening - for all to read - but they clearly didn't realize or care how insulting it was. I mean, seriously, is senior management at our industry's self-regulator so out of touch with the members it regulates that NASD needed to hire someone to generate "general talking points for NASD senior management?"  Senior executives at NASD and now FINRA can't figure out what's appropriate to discuss when addressing industry groups? Hey, anyone ever hear of old-fashioned sincerity? Finally, there's this nonsense:

Other Responsibilities:
The Director is also responsible for:
* Preparing, reviewing, monitoring, and providing guidance on written communications to members, including messaging priorities, tone, and delivery mechanism.
* Oversight of tone and messaging delivered at standing and district committee meetings. . .

Did NASD really need to hire an executive to worry about messaging priorities, tone, and delivery mechanism? Worse, the Director will also have "oversight of tone and messaging delivered at standing and district committee meetings. . ." Funny, I just can't find any reference to developing "sincere content" or to timely responding to complaints from the industry. I also note that despite this job being for the Director of a member relations department, there is nary a word about delivering messages from the industry to NASD. Frankly, that was the legacy and remains the inheritance of FINRA. Why does that matter? Because past is prologue, and this bureaucratic mind-set is what has brought us to the brink of disaster in 2011 and, if not reversed, will take us over the edge. If you're going to get rid of the weeds on your lawn, you have to pull them out by the roots.


Lest I be accused of unfairly singling out FINRA, let me also shine a dim light on the Securities and Exchange Commission, which recently posted on its website a very impressive document titled:

Report on the Implementation of SEC Organizational Reform Recommendations / As Required by Section 967 of the Dodd-Frank Wall Street Reform and Consumer Protection Act

I was planning on waiting for the DVD release of the Report but figured that I would plow through the 25-page document. For starters, literally, we are informed in the preamble of the Report that:

The Dodd-Frank Act directed the U.S. Securities and Exchange Commission (SEC) to engage an independent consultant to conduct a broad and independent assessment of the SEC's internal operations, structure, funding, and the agency's relationship with Self-Regulating Organizations (SROs).

Ah, yes - yet another supposedly broad and purportedly independent review of yet another inefficient and overblown federal agency. As with so many of these high fallutin' government consulting projects, this one will cost taxpayers a bundle and result in little more than a batch of unworkable recommendations (most of which will likely never be implemented). Okay, sure, call me a cynic - it's a badge that I proudly wear.

The bureaucratic doublespeak and tortured English in the Report are truly impressive. In terms of make-work and giving the impression of accomplishment, this effort truly warrants a standing ovation. For starters, consider these lovely bits that are in the document's Executive Summary:

Issued in March 2011, the consultant's study provided 16 optimization initiative recommendations designed to increase the SEC's efficiency and effectiveness.

Aren't you thrilled to learn that our tax dollars have already purchased "16 optimization initiative recommendations." An optimization initiative recommendation? What does that even mean - really? Did the folks at NASD or FINRA lend one of their copywriters to the SEC or its independent consultant? Since the issuance of the March 2011 Boston Consulting Group's study, the Report informs us that:

In the six months since the study was issued, the SEC has developed the necessary program management and oversight infrastructure to address the next step in the agency's on-going multi-year change initiative: conducting a thorough analysis of each recommendation and designing appropriate approaches for those recommendations selected for implementation.

And y'all wonder why the regulation of Wall Street seems clueless and impotent? I'm absolutely thrilled to learn that it took the SEC only six months to develop the "necessary program management and oversight infrastructure." Program management and oversightinfrastructure? I sort of understand infrastructure as taking the form of a bridge, a tunnel - something made with concrete and steel. How does that all get transformed into some managerial and oversight function? Did we at least get a highway overpass to the new managerial and oversight function? Can we directly drive from the SEC to FINRA?

Hey, be thankful, it only took six months to develop that necessary program infrastructure thingamagig. Now what - a bridge to nowhere? Amazingly, the SEC apparently anticipated my sarcasm because it preemptively noted in the Report:

Over the next six months, significant work will have been done within each workstream to analyze the Boston Consulting Group's (BCG) recommendations and recommend what, if any, actions should be taken.

You like that "workstream" thing? Maybe the SEC will get caught up its workstream with a paddle? Okay, that seems reasonable. Lemme see if I got this.

First, ya got yer six months to develop the infrastructure whatchamacallit.

Second, ya got another six months to analyze the consultant's recommendations before you actually do anything with that infrastructure that's now rusting away.

Then, whew, lemme catch my breath here - then, after that year of heavy-duty developing and analyzing, the SEC will probably get around to recommending "what, if any, actions should be taken."

Six months here. Six months there. Why at this rate we could easily waste an entire year just ruminatin' rather than doing something about anything. Of course, that is what passes for government these days, right? And that's also what passes for regulation. Finally, what does the SEC propose to to with the second six months of post-infrastructuring analysis? Well, here it is from the horse's, umm, mouth. The SEC is apparently prepared to:

[D]evelop implementation options, then create a time-phased, multi-year implementation plan that accounts for constraints in the agency budget, management time, and agency priorities. The agency will focus on assessing the schedule, costs, and management bandwidth required for each initiative; identifying cross-work-stream integration points; and developing a detailed prioritization and implementation plan that sequences the various implementation activities.

Implementation options? Time-phased, multi-year implementation plan? Management bandwidth? Cross-work-stream integration points? Did some comic write that or does the SEC truly believe that such gobbledygook passes for intelligible English? How about we just stop here. Enough is enough. Hopefully, you get my point. Business as usual can't continue. Not at FINRA. Not at the SEC. And frankly, not here, at NAIBD.


In concluding my remarks this afternoon, I look around and wonder why I'm here. I don't like FINRA. I don't like the SEC. I don't like NAIBD. I've long been disappointed with NAIBD's failure to do what was necessary to advance a credible small-firm trade group among the old NASD and now FINRA community. Frankly, I'm a dyspeptic curmudgeon when it comes to the failed regulation of Wall Street.

In the mid-1990s, I was one of the founders of the old NASD Dissident Movement, which became the old FINRA Dissident Movement. Since the onset of the Great Recession, the NASD/FINRA Dissident Movements have turned into the We Don't Care About FINRA Because We're All Going Broke and Out of Business Anarchist Movement

My relationship with NAIBD goes back to when this organization was known as the California Association of Independent Broker Dealers. I first came into contact with CAIBD when various dissident and reform factions joined forces in 1998 to run the first slate of contested candidates in the history of the NASD's Board. Within a few weeks, from concept to realization, we managed to patch together a slate of four candidates. Although I was one of the two losing candidates, we did manage to elect two of our four nominees that year, and set the stage for future successful efforts at the national and local levels.

After we all scored that first historic contested NASD election victory, the small firm coalition collapsed. In the 1990s, I believed that the small firm community needed to challenge NASD's Board nominees in order to retain control over the character of the self-regulatory organization. Even way back in the mid-90s, I saw signs that NASD was trying to refashion itself into an SRO by, for, and of member firms that were vying to become financial superstores

If you travel around this country, you become struck by the sad fact that every major American city is beginning to look alike. The regional charm and character is vanishing. Go to any major US city and the landscape is eerily and sadly similar: Barnes And Noble, Staples, Best Buy, Citibank, Sephora, Starbucks, Walmart, Costco, Whole Foods. And what have those big box stores and national retailers replaced? Smaller, family owned businesses. And what have those chains left in their wakes? Devastated downtown shopping districts, lousy customer service, and a lost sense of community.

Once the local yokels were driven out of business by cutthroat predatory pricing, those discounts quickly vanished. And by the time everyone began to ask questions and understand the trade-offs that were made, well, by then, it was just too late. Consequently, it should come as no surprise to you that I have long been a staunch advocate of smaller, indie and regional NASD and now FINRA member firms. Google my name and you'll see some two decades of small firm advocacy.

Unfortunately, I was a lone voice in the wilderness. NASD died and was supplanted by an even worse behemoth: FINRA. Clearly, as of today, the battle to retain FINRA's mission as one informed by the small firm majority of its membership has been lost. Today, FINRA is little more than another Washington, DC-centric organization that believes bigger is better and that is engaged in socially engineering smaller member firms out of business.

It's not that FINRA is populated with evil career regulators. That is a comic book dumbing-down of reality. The problem is that FINRA is little more than a glorified trade group dedicated to servicing the needs of member firms with hundreds and thousands of registered persons - which would be wonderful, but for the fact that the overwhelming majority of FINRA's member firms are 100 and fewer registered persons. Consequently, the problem with FINRA is FINRA's mission and FINRA's agenda.

To be blunt, for too many years, I and others in the small firm community had looked to NAIBD as a possible ally, as a possible advocate for small firm issues. Instead, for many of us outside of your organization, we have come to distrust NAIBD as little more than NASD's and more recently FINRA's proxy - unwitting or otherwise. Worse, for those of us in 2006 and 2007 who fought against the merger of the NYSE and NASD into FINRA, NAIBD was an adversary and a vocal opponent. Many of us in the dissident and reform movement have never forgiven NAIBD for its pivotal role in creating FINRA.

As a result of the failure to maintain an effective small firm coalition, I believe, in part, that we paved the way for the disastrous state of affairs now confronting FINRA's small firm community. Over the years, not only have FINRA's smaller firms lost their influence in the SRO's affairs, but you have been marginalized to the point where it is almost impossible to regain your due and fair representation. Moreover, the leadership of the small firm community is now in the hands of individuals who seem only interested in creating a cult of personality - theirs; and if they can't secure the adulation and worship that they seek, they are intent on pulling everything down among us.

As with the American political scene today, the cost of disenfranchising or alienating segments of the electorate is that you cultivate radicalism. Lost in the world of extremists is the middle ground and common cause.

As such, my presence here today is a testament to my desire to give it one last shot at prompting, provoking, and motivating NAIBD to fashion itself into a credible trade organization that will professionally advocate the needs of FINRA's small firm community.  No, I'm not asking you folks to grab pitchforks and torches and take to the streets, nor am I asking you to occupy Wall Street or dress up in silly revolutionary era costumes. What I am asking is that you stand for something, that you espouse principles that you will abide by, and that you not only force your small firm members to take their medicine when it's necessary but you also recognize that standing up to FINRA or the SEC may at times be your proper role. I'm not advocating trench warfare but, at the same time, I'm not advocating that you retreat in response to every charge from FINRA or the SEC. If you don't stand for anything then you stand for nothing.

Ladies and gentlemen, our industry and the small firm community are in disarray. The times call for honest leadership with a sincere agenda to reform Wall Street's regulatory scheme. I call upon NAIBD to assume that leadership role and to take on the difficult task of setting the reform agenda. Please, I beg you, rise to the occasion.