FINRA Conducts Retrospective Rule Review on Senior Investors

August 12, 2019 :

FINRA is conducting a retrospective review to assess the effectiveness and efficiency of its rules and administrative processes that help protect senior investors from financial exploitation. The protection of senior investors is a top priority for FINRA. As such, FINRA is interested in whether additional tools, guidance or changes to FINRA rules or administrative processes are appropriate to further address suspected financial exploitation and other circumstances of financial vulnerability for senior investors. 

This Notice outlines the general retrospective rule review process, summarizes the rules and administrative processes that most directly apply to financial exploitation of senior investors, and seeks responses to a number of questions related to addressing financial exploitation. . .

Oh my, a "Retrospective Rule Review" -- is someone at FINRA infatuated with alliteration? With a little more thought, they could have hit a four-bagger with "Retrospective Regulatory Rule Review." One thing about the retrospective review -- can a review ever be something other than retrospective in nature? How do you review anything without looking backwards? You do realize that a rearview mirror is arranged so that you can see what's going on behind you, right? 

Phasers On Stun

As further detailed in part in the FINRA Regulatory Notice 19-27

In conducting the review of rules relating to financial exploitation of senior investors, FINRA staff will follow a similar process to that of previous retrospective rule reviews. In general, the review process consists of an assessment and an action phase. During the assessment phase, FINRA will: 
    • evaluate the efficacy and efficiency of the rule or rule set as currently implemented, including FINRA's internal administrative processes; 
    • seek input from both external and internal stakeholders; 
    • draw on the expertise of its advisory committees and other subject-matter experts inside and outside of the organization; and 
    • seek out the views and experiences of other stakeholders, including industry, member firms, investors, investor advocates, interested groups and the public. 
Upon completion of this assessment, FINRA staff will consider appropriate next steps, which may include some or all of the following: modifications to the rules, updated or additional guidance, administrative changes or technology improvements, additional tools, educational materials or other resources, or additional research or information gathering. 

The action phase will then follow. To the extent action involves modification of rules, FINRA will separately engage in its usual rulemaking process to propose amendments to the rules based on the findings. This process will include input from FINRA's advisory committees and an opportunity for comment on specific proposed revisions in a Regulatory Notice or rule filing with the Securities and Exchange Commission (SEC), or both.

At Page 3 of the Regulatory Notice 19-27

My -- what an ambitious plan! FINRA Staff will be following "a similar process to that of previous retrospective rule reviews." Now that's thinking outside the box! That's throwing out the gameplan and calling an audible. What audacity!

FINRA's brilliant strategy for fighting elder financial abuse starts with an assessment phase, which consists of a Regulatory Notice replete with questions seeking answers, and then waiting two months for comments. After this assessment phase winds down (often with an extension for the two-month comment period), FINRA asserts that it will enter into the impressive sounding "action phase." Yeah, sure, "action," indeed. As the Regulatory Notice concedes, the so-called action phase envisions nothing more than FINRA engaging "in its usual rulemaking process to propose amendments to the rules based on the findings."

If I were a cynical fellow with a sardonic bent, I might say that FINRA has sort of figured out that the longer it takes to conduct a retrospective rule review followed by an assessment phase and an action phase, the more elderly will die in the interim and, hey, problem solved!

3,600 FINRA Employees

On's "Working at FINRA", we are informed that "FINRA's 3,600 smart, dedicated and passionate employees work in 16 offices across the country." In the event you are a skeptical gal or guy, FINRA has spared no expense to convince you that the organization has, in fact, 3,600 smart, dedicated and passionate employees. FINRA has posted 12 videos filled with smart, dedicated and passionate employees. Sure, I was a non-believer at first, I mean, c'mon, you can understand why I would look askance at such a claim, but, omigod, after sitting through all 12 of FINRA's online videos, I believe! With 3,600 employees, FINRA has more than one employee per the dwindling number of its member firms, now 3,589 (see, FINRA "Statistics" for June 2019 at

Obviously, I'm not understanding something:
  • With 3,600 employees working at 16 office, why does FINRA need to even post a Regulatory Notice in August that will seeks comments for two months through October? 
  • Don't any of those 3,600 have ideas as to how to combat elder fraud? 
  • Isn't FINRA trying to hire employees with industry experience and regulatory savvy? 
  • Does FINRA think it's an efficient and effective strategy to sit dead in the water for two months while trolling for answers about how to best combat elder abuse? 
The two-month comment period set out in FINRA Regulatory Notice 19-27 is merely the beginning of a lot of time-killing and time-wasting. FINRA will take months to cull through the responses, and host roundtables, and prepare white papers, and post initial proposals, and seek two months of comments on the proposals, and then review the comments on the proposals, and then re-submit everything to all the roundtables, panels, committees, and subcommittees, and then post more updates, and, by that time, everyone involved has likely retired or died -- so the next generation at FINRA will start the Retrospective Rule Review anew. All kidding aside, ya got 3,600 employees involved in Wall Street regulation and you can't figure out, in-house, whether your rules and administrative processes are effective and efficient? 

SEC Elder Fraud Task Force and Roundtable

Spread out among the 12-page FINRA Regulatory Notice 19-27 are some 20 enumerated questions for which FINRA is seeking answers about the "financial exploitation and other circumstances of financial vulnerability for senior investors." at page 8 of the Regulatory Notice 19-27.  Isn't part of FINRA's mission as a Wall Street regulator to know about the financial exploitation of senior investors? And before you're too quick to answer, please read "SEC Task Force To Host Roundtable On Elder Fraud (Coffee And Danish Will Be Served, Maybe)" ( Blog / July 23, 2019) As set forth in part in the Blog July 23rd article:

[F]ederal prosecutors and regulators are rolling up the fraudsters and making great headway in the war against elder fraud -- which is as it should be. We need more cops on the Wall Street beat. Unfortunately, in this summer's installment of regulatory bull-shit, we have the SEC rolling out a Task Force, which will host a Roundtable. SEC Retail Strategy Task Force to Host Roundtable on Combating Elder Investor Fraud (SEC Release) A Task Force hosting a Roundtable. It's hard not to laugh at such idiocy. It's hard not to conclude that this is all about giving the appearance of effort rather than striving for accomplishment. . . .

Why actually do something about elder investor fraud when you can serve danish, bagels, and coffee at a roundtable? I'm guessing that many veteran SEC examiners, investigators, and lawyers have suggestions as to how the federal regulator could effectively combat elder fraud, but, let's not get carried away here -- those folks aren't political appointees, and, as such, who the hell cares what they have to say. Moreover, let's not forget all the studies, white papers, and panels that have yielded all sorts of disregarded advice over the years. 

Which brings us to 2019, when the SEC thinks that the best use of its funds and time is to haul out a Task Force, which will host a Roundtable. This roundtable's ambitious goal is to "explore views" about how to "identify and combat elder investor fraud." 

Are you shittin' me? 

For starters, the best way to combat elder investor fraud would be to cut the waste of time and expense inherent in having a task force host a roundtable. . . 

Hmmmm . . . maybe FINRA the self-regulatory-organization could just send a few of its 3,600 employees to the SEC's roundtable and they could take notes, and, sure, have a couple of cups of coffee and a cinnamon bun or two.

FINRA November 2019 Senior Conference

Even more troubling is my sense that FINRA sees the whole elder financial abuse issue as yet another in a long line of cringe-worthy opportunities to make a buck. 

FINRA has scheduled a Senior Investor Protection Conference for November 12, 2019 What a lovely coincidence that the November 12th conference will start just about a month after the October 8, 2019, deadline for submissions of two-months worth of comments about FINRA Notice 19-27 (unless FINRA extends the submission deadline). As set forth in the online announcement about the FINRA conference:

The Senior Investor Protection Conference is a one-day event dedicated to sharing the most up-to-date regulatory information, effective strategies and solutions for protecting senior investors and vulnerable adults. This conference includes an expanded focus on FINRA Rules 2165 and 4512-which provide firms with tools to help protect seniors and vulnerable investors from financial exploitation. The conference also offers opportunities to network and discuss issues specific to senior investors with FINRA staff and industry practitioners.

That all sounds so very sincere and oh-so-very regulatory oriented. After all, FINRA the largest self-regulatory-organization on Wall Street is promising to "provide firms with tools to help protect seniors and vulnerable investors from financial exploitation." Sign me up!  In fact, sign up every damn member firm and every associated person!!  What a great idea -- hold a free, one-day conference to attack the pernicious exploitation of vulnerable seniors. I can't wait to log on to the free program. I can't wait to find out if FINRA's local district office will be holding a free viewing of the conference.

And then you hear the cash registers' ka-ching.

The FINRA Conference Announcement states:

A room block is available at the Hilton Washington DC National Mall hotel for registered attendees. The special room rate of $255 per night, plus tax, is available until October 18, 2019, or until the room block is sold out. Hotel reservations will then be accepted on a space- and rate-available basis.

Read a bit farther into the FINRA Conference Announcement and you come across all these expensive "Registration and Fees" rates:
  • $945 for FINRA Member Firm
  • $495 for FINRA Member Small Firm
  • $1,325 for Non-Member
  • $670 for Government Regulator
Thankfully, FINRA is offering a modest discount on the above rates for those who register by June 28, 2019, which, is long since gone. If you missed the boat, you can still get an "In Person Group Rate" (for firms registering three or more employees "at the same time with the same credit card"):
  • $800 per employee FINRA Member
  • $370 per employee FINRA Member Small Firm
  • $1,130 per employee Non-Member
Ever the capitalist on Wall Street, FINRA also sees yet another money-making opportunity off of the regulation of the exploitation of seniors:

FINRA has a limited number of exhibitor opportunities available for this conference. To secure your participation, contact  . . .

What will an attendee get at this Senior Protection Conference?  Consider how not-so jam-packed with serious discussion and problem-solving the November 12th date will be:

7:30 a.m. - 8:30 a.m. Networking Breakfast:
Bill Singer's Snarky Comment: While many seniors will be busy during this morning hour cutting their prescription pill in half, you can hobnob with folks who might want to hire you or sell you something or buy something from you during an hour of fabulous networking and enjoy free coffee and danish (tea available for those who prefer).

8:30 a.m. - 8:35 a.m. Welcome and Opening Remarks
Bill Singer's Snarky Comment: You really need 30 minutes to say Welcome and to reiterate what you've set forth in the written documentation announcing the agenda for the Conference?

8:35 a.m. - 9:20 a.m. Keynote Address:
Bill Singer's Snarky Comment: What's the point of a Keynote Address? The Conference is about "effective strategies and solutions for protecting senior investors and vulnerable adults." I've spent several hundred bucks and after two hours, I haven't gotten diddly squat.

9:20 a.m. - 9:35 a.m. Networking Break:
Bill Singer's Snarky Comment: Are you shittin' me? Networking break? Break from what -- coffee, danish, the networking breakfast, opening remarks, and the keynote address? Why the hell didn't you roll the 9:20 networking break into the 7:30 networking breakfast?

9:30 a.m. - 10:30 a.m. Diminished Capacity and Suspected Elder Abuse
As the number of older Americans continues to climb, registered advisors face a critical challenge - how to take care of clients experiencing diminished capacity or financial exploitation. During this session, panelists share helpful tools to address privacy concerns, helpful contractual protections, identification of red flags and steps to take once the red flags are identified.
Bill Singer's Snarky Comment: Two hours into this one-day event, and we're only now first getting to anything of substance. 

10:30 a.m. - 10:45 a.m. Networking Break
Bill Singer's Snarky Comment: This is the third networking opportunity since 7:30 a.m. Enough already.

10:45 a.m. - 11:45 a.m. Working With Senior Investors
During this session, FINRA staff and industry panelists discuss the current and upcoming senior population, and provide practical tips for working with an aging decision maker. As marketing and communicating to senior investors is a vital part of many firms' business, panelists will also highlight the importance of ensuring clear and effective communication, and discuss varied oversight practices.
Bill Singer's Snarky Comment: One hour? That's all you're allocating for discussing "practical tips for working with an aging decision maker" and to consider "varied oversight practices?" You do realize that you've already given an 1 hour and 30 minutes of networking but only 60 minutes about how to work with seniors?

11:45 a.m. - 1:00 p.m Networking Lunch and Dessert with Exhibitors
Bill Singer's Snarky Comment: 1 hour and 15 minutes of networking at lunch plus the ever attractive "dessert with exhibitors." Is FINRA planning on donating some money to meal deliveries for the homebound elderly devastated by Wall Street fraud? What are the plans for offering desserts to senior citizens afflicted with diabetes who can't afford their meds?

1:00 p.m. - 2:00 p.m. Suitability and Sales Practices Considerations for Senior Investors
When working with senior clients, it is important for a firm's procedures and controls to properly gauge the suitability of recommendations to senior investors and ensure clear, straightforward sales practices. Join FINRA staff and industry experts as they discuss FINRA's suitability rule, the rule's potential interplay with cognitive decline, and the importance of ensuring senior clients understand product risks.
Bill Singer's Snarky Comment: Anyone want to bet on the over/under for the number of attendees who will be snoring through this session thanks to the sugar-crash from the dessert with exhibitors.

2:00 p.m. - 2:15 p.m. Networking Break
Bill Singer's Snarky Comment: Again with the goddamn networking breaks?

2:15 p.m. - 3:15 p.m. Scams Targeting Older Investors
In recent years, senior investors have increasingly been victims of investor scams. During this session, panelists highlight emerging trends in investor scams used to defraud older investors, provide tips to identify potential "red flags" and discuss who to contact if a fraudulent scheme is suspected.
Bill Singer's Snarky Comment: Nothing like a one-hour filler between two 15 minute networking breaks.

3:15 p.m. - 3:30 p.m. Networking Break
Bill Singer's Snarky Comment: Grrrrrrrrrrrrrrrrrrrr.

3:00 p.m. - 4:30 p.m. Legal and Regulatory Update
Panelists explore the evolving regulatory structure surrounding senior investor protections and the challenges facing regulators and financial services professionals when developing an effective, efficient and integrated protection framework.
Bill Singer's Snarky Comment: The saved the legal and regulatory update for the last panel of the day when, c'mon, let's all admit me, many folks have already left to make their flights home or to have an unscheduled networking break.

4:30 Conference Adjourns

FINRA Conducts Retrospective Rule Review on Senior Investors
( Blog)

Former PCAOB Inspections Leader And KPMG Executive Director Sentenced For Scheme To Steal Confidential PCAOB Information In Order To Fraudulently Improve KPMG's PCAOB Inspection Results (DOJ Release)

South Florida Resident Sentenced to 70 months for Investment Fraud Scheme after Attempting to Flee the Country (DOJ Release)

FINRA OHO Panel Fines and Suspends Rep for Outside Business Activities. FINRA Department of Enforcement, Complainant, v. Partho S. Ghosh, Respondent (FINRA OHO Decision)

FINRA Small Firm Member Board of Governors Election
Voting Ends August 19, 2019

The FINRA Small Firm community is once again up in arms over the ongoing election for the open 2019 Small Firm Member Board of Governors' seat. "UPDATE: 2019 FINRA Contested Small Firm Election: Vote for Linde Murphy" ( Blog /  July 26, 2019). In this latest dust-up, FINRA's National Nominating & Governance Committee nominated sitting Small Firm Governor Robert A. Muh for re-election and, thereafter, transmitted an email on July 25, 2019, urging eligible voters to support their nominee's candidacy despite the existence of Small Firm Member Petition Candidate Linde Murphy. Murphy needed to obtain the requisite 3%-plus petitions in support of her candidacy, whereas Muh, who previously ran for his first term as a petition candidate, avoided that inconvenient qualifying step by accepting the Nominating Committee's nod. 

Why does any of this matter? 

A Board of 24

The FINRA Board of Governors consists of 24 members: 

  • Chief Executive Officer of FINRA; 
  • 13 Public Governors; 
  • 1 Floor Member Governor; 
  • 1 Independent Dealer/Insurance Affiliate Governor; 
  • 1 Investment Company Affiliate Governor; 
  • 3 Small Firm Governors (1 to 150 registered representatives);
  • 1 Mid-Size Firm Governor (151 to  registered representatives); and 
  • 3 Large Firm Governors (500 or more registered representatives) 

A Powerful Committee

According to FINRA's website:


The Nominating and Governance Committee is responsible for nominating persons for appointment or election to the FINRA Board, as well as nominating persons to fill vacancies in appointed or elected governor seats on the Board. The Committee also nominates Industry and Public members for positions on FINRA's National Adjudicatory Council.

The Committee is responsible for periodically reviewing and recommending changes to standing committee charters and, in consultation with the CEO, nominates the members and chairs of each standing committee of the Board. Also in consultation with the CEO, the Committee develops and recommends to the Board guidelines for effective corporate governance. In addition, the Committee reviews and approves appointments to each of FINRA's advisory committees and changes to the advisory committee enabling resolutions.

3,261 FINRA Small Member Firms

In "Upcoming FINRA Board of Governors Election" (FINRA Election Notice / May 24, 2019), we are informed that:

As of the close of business on Thursday, May 23, 2019, the number of FINRA large firms was 174, and small firms was 3,261.

According to FINRA's online "Statistics", as of June 2019 there were 3,589 Member Firms. As such, FINRA's 3,261 Small Firms account for 91% of the self-regulatory-organization's membership; however, that 91% majority has been allocated only 3 out of 24 FINRA Board of Governors seats -- which amounts to 12.5% of the Board seats for 91% of the organization's member firms! 

The Power to Appoint. The Power to Nominate.

Somewhat lost in all the verbiage of the FINRA Election Notice is this nugget:

Of the 24 Board members, the following seats are appointed by the FINRA Board from candidates recommended by the Nominating Committee: the Public Governors, Floor Member Governor, Independent Dealer/Insurance Affiliate Governor and Investment Company Affiliate Governor (Appointed Governors).

The Nominating Committee also may nominate individuals to run for election for the seven elected governor seats that comprise the three Small Firm Governors, one Mid-Size Firm Governor and three Large Firm Governors (Elected Governors). . . . 

FINRA's Nominating Committee of three industry and four public governors appoints 16 of the Board's 24 Governors (which works out to 67% of the Board): 13 Public Governors and the 1 Floor Member Governor and the 1 Independent Dealer/Insurance Affiliate Governor and the 1 Investment Company Affiliate Governor. In addition, the Nominating Committee "may nominate" the 7 industry governors. Apparently, FINRA's CEO gets a free pass and is neither appointed nor nominated. We should all be so lucky!

91% With Little Proportionate Power -- FINRA's Dirty Little Governance Secret

Consider these extracts from the FINRA Nominating Committee's July 25th email in support of Muh's nomination:

[O]ur committee is comprised of three industry governors and four public governors. . .

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. . . 

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. . . .

Given how the small firms' Board representatives roles are "crucial" since the majority of FINRA's Board "are not from the industry," it's no small wonder that such non-industry folks would look to Bob Muh in order to "get an understanding," Thankfully Bob sits on the all-power FINRA Nominating Committee. Having been unfairly restricted to disproportionate representation on the Board, at least the Small Firm community has 1 of 7 seats on the all-powerful Nominating Committee, which is about 14% of the Committee's seat and a modest bump-up from the 12.5% of the Board seats. 

Ummm . . . hold on a sec. What???

I see from the 2019 roster of the FINRA Nominating Committee that, in fact, Robert Muh is not a member of the Nominating Committee

So . . . which Small Firm Member Governor is a member of the Nominating Committee? 

I don't see the name of Small Firm Member Governor Stephen A. Kohn. 

I don't see the name of Small Firm Member Governor Page W. Pierce. 

That's all there is. There ain't no more Small Firm Governors. 

Omigod, FINRA engineered its Small Firm Member community out of any Nominating Committee seats! There are three "industry" seats set aside on the Nominating Committee. There are three "industry" categories of Large, Mid-Sized, and Small. Shamefully, there is not a single set-aside for a Small Firm Member Governor to sit on the Nominating Committee.  91% of FINRA's member firms have 0% representation on FINRA's Nominating Committee.

As to the so-called independence of the National Nominating Committee, consider this from "Upcoming FINRA Board of Governors Election" (FINRA Election Notice / May 25, 2018)

FINRA Nominating Committee Nominee

FINRA's Nominating Committee has nominated the following individuals: 

Large Firm Governor Candidate: Timothy C. Scheve, Janney Montgomery Scott LLC 

Mid-Size Firm Governor Candidate: Brian J. Kovack, Kovack Securities, Inc. 

Small Firm Governor Candidate: The Nominating Committee determined it would not nominate a candidate for election in 2018. Instead, any eligible candidates who obtain the requisite number of petitions will be included on the ballot. 

Similarly, as to the Nominating Committee's Chair, consider this from "FINRA Announces Governor Elections and Appointments" (FINRA News Release / August 22, 2017)

At the July 2017 meetings, the Nominating Committee nominated and the Board made a number of appointments to the Board that became effective at the Annual Meeting. Governor Kathleen A. Murphy, President of Fidelity Personal Investing, was appointed to succeed Governor John J. Brennan as the Investment Company Affiliate on the Board. . . 

All three of the industry member firm governors sitting on FINRA's Nominating Committee were appointed or nominated by that same committee, and not one of those appointed/nominated industry governors is designated as a Small Firm Member Governor. 

So those who do the appointing are appointed to appoint those who do the appointing -- and that's a conflict-free, democratic process? 

And that's not designed to marginalize and silence the voice of 91% of the organization's member firms? 

Just imagine how one of the many public companies traded by FINRA's member firms would fare if they proposed to restrict 91% of their public shareholders to 12.5% of their Board seats and shut them out of any role on the Nominating and Governance Committee!

And FINRA wonders why its Small Firm Member community feels isolated?  Why some 3,261 firms feel marginalized? Why the Small Firm community looks upon the Nominating Committee's email as an unwanted interference in a contested election? 

The Protest Vote for Candidate Linde Murphy

Before this whole mess blew up on July 25th, Petition Candidate Linde Murphy submitted a public statement to the Blog by a July 24, 2019, 5 p.m. EDT deadline, (as did Nominee Robert Muh). In her prescient statement, Murphy assured the Small Firm Member community that:


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.

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.