A Call for Boycott: FINRA Board of Governors' Cowardly Silence Becomes Thunderous

May 1, 2023

Bill Singer, the publisher of the "Securities Industry Commentator" and the "BrokeAndBroker.com Blog," calls upon all industry and investor advocates to demand the immediate removal of all sitting FINRA Governors and to insist that the self-regulatory-organization reconstitute its Board with Governors who will ensure that the regulator's culture adheres to a "tone from the top" approach. Further, until such time as FINRA demonstrates a sincere commitment to reform, all FINRA member firms should instruct their Executive Representative to not cast a vote for any candidate in any FINRA election by way of a boycott.

A Matter of Appearances

This past weekend, disgraced financier Jeffrey Epstein's private calendar was published, and, in part, reveals:

"planned meetings with a slew of prominent individuals, including now-CIA Director William Burns, Bard College president Leon Botstein, Obama White House counsel Kathryn Ruemmler and professor Noam Chomsky."

at "Epstein’s private calendar reveals planned meetings with Obama admin official, CIA chief / Epstein died in 2019 in a jail cell" (Fox News / April 30, 2023)
https://www.foxnews.com/politics/epsteins-private-calendar-reveals-planned-meetings-obama-admin-official-cia-chief As to Epstein's calendared references to attorney Ruemmler, the April 30th Fox News report alleges that:

Ruemmler had dozens of meetings with Epstein following her work for the Obama administration and before taking the reins as Goldman Sachs' top lawyer in 2020, according to WSJ. The documents show Epstein was planning on Ruemmler joining him for a trip to Paris in 2015 and another visit to his private island in the Caribbean in 2017.

A Goldman Sachs rep told the outlet that Ruemmler had a working relationship with Epstein when she was employed at law firm Latham & Watkins LLP, but did not travel with Epstein. The spokesperson said Epstein introduced Ruemmler to potential legal clients, such as Bill Gates.

"Many of Ms. Ruemmler's contacts related to a potential representation involving the Gates Foundation, a representation of the Edmond de Rothschild bank, and other business opportunities," a Goldman Sachs spokesperson told Fox News Digital on Sunday.

"I regret ever knowing Jeffrey Epstein," Ruemmler said, according to WSJ.

On the heels of the Epstein calendar revelations, it was reported in part in "Judge says JPMorgan could be liable for Epstein sex trafficking if Staley knew about it" (Reuters by Jonathan Stempel / May 1, 2023)
https://www.reuters.com/legal/judge-says-jpmorgan-could-be-liable-epstein-sex-trafficking-if-staley-knew-about-2023-05-01/ that:

U.S. District Judge Jed Rakoff in Manhattan discussed Staley's alleged role, which Staley denies, in a decision explaining why he refused to dismiss lawsuits accusing JPMorgan and Deutsche Bank AG (DBKGn.DE) of enabling Epstein's sex trafficking.

"Sexism on Wall Street: The Cowardly Silence of FINRA's Board of Governors" (BrokeAndBroker.com Blog / November 28, 2022)

Last year, in November 2022, I called out against the cowardly silence manifested by FINRA's Board of Governors in the face of sexism on Wall Street. "Sexism on Wall Street: The Cowardly Silence of FINRA's Board of Governors" (BrokeAndBroker.com Blog / November 28, 2022)

https://www.brokeandbroker.com/6770/finra-goldman-sexism/ As the opening paragraph of my November 2022 Blog stated:

By way of preamble, this blog is about Goldman, Sachs & Co. and the Financial Industry Regulatory Authority's ("FINRA") Board of Governors. This is about a multinational investment bank and financial services company. This is about Wall Street's largest self-regulatory-organization. This is about a sexual discrimination Class Action filed in 2010 against Goldman Sachs. This is about a growing chorus of troubling, disturbing, unsettling allegations by female professionals against Goldman. This is about the appointment of the Goldman Sachs General Counsel to the FINRA Board of Governors. This is about the cowardly silence of FINRA's Board.

In pertinent part, my November 28, 2023, BrokeAndBroker.com Blog asserted the following in response to the 2021 appointment to the Board (in contradistinction to the "election") of Goldman Sachs' General Counsel Kathryn Ruemmler:

November 2022: Goldman General Counsel Kathryn Ruemmler Defends CEO Solomon

Goldman Sachs. Harassed. Sexual Assault. Misogyny. David Solomon. Oral Sex. Sexism. Mistreatment of Women. Sexist Culture. Troubling Behavior. SEC Charges. Not exactly the stuff a publicist dreams about. Understandably, there was pushback from the firm. Following Bloomberg News' November 15th story about Goldman Sachs' Chief Executive Officer David Solomon and a $12 million settlement with a former Goldman Partner, we have, in part, this:

The head of Wall Street’s most prestigious investment bank bragged to the underlings that he was the only one among the group to have received oral sex the previous night, according to a complaint revealed Tuesday by Bloomberg News.

. . .

The alleged remark by Solomon was not the central focus of the lawsuit, which claimed Goldman paid women less than men for doing the same jobs and that the company tolerated crude and vulgar remarks from senior officials.
. . .

"Bloomberg’s reporting contains factual errors, and we dispute this story," said Kathy Ruemmler, General Counsel at Goldman. "Anyone who works with David knows his respect for women, and his long record of creating an inclusive and supportive environment for women."

at "Goldman Sachs boss David Solomon 'bragged about getting oral sex': complaint" (New York Post / November 15, 2022)

https://nypost.com/2022/11/15/goldman-sachs-boss-david-solomon-bragged-about-getting-oral-sex-night-before-complaint/

Goldman General Counsel/FINRA Governor Ruemmler

Goldman Sachs General Counsel Kathryn Ruemmler minced no words. Bloomberg's article had errors. Goldman disputes the story. Contrary to Bloomberg's purportedly erroneous, disputed article, General Counsel Ruemmler said that CEO David Solomon respects women and has fostered an inclusive, supportive environment for them. Kathryn Ruemmler has an impressive curriculum vitae:

"Goldman Sachs Gives First-Year Legal Chief $17.5 Million" (Bloomberg Law / March 18, 2022)
https://news.bloomberglaw.com/business-and-practice/goldman-sachs-pays-first-year-legal-chief-nearly-12-7-million:

Goldman Sachs Group Inc.'s legal chief Kathryn Ruemmler received roughly $17.5 million in total compensation after being appointed its top lawyer a year ago, the firm disclosed in a proxy Friday.

Goldman paid Ruemmler $7.9 million in cash last year, including $1.5 million in base salary and a $6.4 million bonus, the proxy showed. Goldman gave her a stock bonus valued at $9.6 million, the firm said in a disclosure separate from its compensation table.

"FINRA Board Appoints Deborah Bailey and Kathryn Ruemmler as Newest Governors" (FINRA News Release / January 8, 2021) https://www.finra.org/media-center/newsreleases/2021/finra-board-appoints-deborah-bailey-and-kathryn-ruemmler-newest, which states in part that:

Ruemmler is the Global Head of Regulatory Affairs at Goldman Sachs, where she serves on the firmwide Management Committee, is Co-Vice Chair of the Firmwide Reputational Risk Committee and is Co-Chair of the Regulatory Reform Steering Group. Prior to joining Goldman Sachs as a Partner earlier this year, Ruemmler was a Litigation Partner at Latham & Watkins LLP, where she was Global Chair of the White Collar Defense and Investigations practice. Previously, she served as counsel to President Barack H. Obama and was his longest-serving White House counsel. She also served in the Department of Justice, including as Principal Associate Deputy Attorney General, Deputy Director of the Enron Task Force, and Assistant United States Attorney for the District of Columbia. Earlier in her career, Ruemmler served as Associate Counsel to President William J. Clinton. She received a bachelor's degree in English from the University of Washington and a law degree from Georgetown University.

Additional details about Ruemmler's background are available at her online biography on FINRA's website
https://www.finra.org/about/governance/finra-board-governors/kathryn-ruemmler, where we additionally learn that she is a FINRA Industry Governor / Floor Member Representative, and she serves on FINRA's Nominating & Governance Committee and its Regulatory Policy Committee.

Ruemmler's Dual Role (Inescapable Conflicts)

Kathryn Ruemmler has nothing whatsoever to apologize for in terms of where she's worked, who she's represented, what she has said in discharging her obligation as a zealous advocate, or in accepting the nomination to FINRA's Board. To answer the unasked question: No, I don't know her and have never met or even spoken to her.

In January 2021, the FINRA Board of Governors appointed Kathryn Ruemmler to fill the Floor Member Governor's seat. There was no election. Ruemmler was hand picked, and her appointment was approved by the full Board. The Governors who voted to approve Ruemmler's nomination knew or should have known of the troubling allegations set out in the pending 2010 Class Action against Goldman Sachs; and, as such, should have made a full inquiry of Ruemmler as to her likely role, going forward, on behalf of her employer.

In her role as Goldman Sachs' General Counsel, Ruemmler has defended her employer in the press against charges of sexism. Fair enough in her role as General Counsel, but, in her dual capacity as a FINRA Governor, Ruemmler's energetic defense of her firm undercuts FINRA's purported commitment to diversity: "FINRA Creates Industry Diversity Advisory Committee / New Committee Highlights FINRA’s Commitment to Improving DEI in the Securities Industry" (FINRA Release / November 9, 2022)
https://www.finra.org/media-center/newsreleases/2022/finra-creates-industry-diversity-advisory-committee.

When Goldman Sachs General Counsel Ruemmler asserts that Goldman Sachs CEO Solomon has "respect for women" and a "long record of creating an inclusive and supportive environment for women," her comments are raised to refute claims to the contrary. In defending her firm and its senior management, by inference (if not in actuality) Ruemmler questions the veracity of the women whose allegations provide the underpinnings of the Class Action Complaint. Either Goldman Sachs was/is a sexist employer, and the various female Plaintiffs have made valid claims; or, Goldman Sachs was not/is not a sexist employer, and the Plaintiffs have made invalid claims. Accordingly, we know where General Counsel Ruemmler stands on the Class Action Plaintiffs' allegations; but where does FINRA Governor Ruemmler stand on the allegations -- and where does FINRA's Board of Governors stand on the allegations?

The FINRA Regulatory Policy Committee members (of which Ruemmler is one) serve as the FINRA Regulation, Inc. Board of Directors -- that's no small dual role because that involves the "primary day-to-day responsibility for the regulation, surveillance, examination and disciplining of member firms and registered persons, with respect to market activities as well as other self-regulatory matters." Notwithstanding that daily regulatory responsibility, FINRA Governor/FINRA Regulatory Policy Committeeperson/Goldman Sachs General Counsel Kathryn Ruemmler disapproved efforts by the United States Department of Justice to appoint more independent monitors after criminal settlements: "Goldman Sachs Legal Chief Knocks Biden DOJ on White Collar Shift" (Bloomberg Law / March 4, 2022) https://news.bloomberglaw.com/us-law-week/goldman-sachs-legal-chief-knocks-biden-doj-on-white-collar-shift, where she is quoted, in part, as saying:

"I have long been of the view that monitors should really be reserved for the quite unusual case, that they should not be the norm, that they should be only required in very very rare circumstances," said Ruemmler, who served as White House counsel to former President Barack Obama.

DOJ is "at its best when it’s investigating and prosecuting crimes," added Ruemmler, who was also principal associate deputy attorney general under Obama. "That’s what they should be doing. And when you start getting into monitors, the department starts to feel and I think look a bit more like a regulator."

Which begs the question as to whether FINRA-the-regulator agrees with Ruemmler's press comments about how the United States Department of Justice should confine itself to "investigating and prosecuting crimes," because once DOJ starts "getting into monitors, the department starts to feel and I think look a bit more like a regulator." Maybe FINRA is now enamored with the idea that as a regulator it should do more monitoring and less of that investigating and prosecuting stuff? I am unaware of any published comment by FINRA refuting Governor Ruemmler's position. Speaking of possibilities, perhaps the FINRA Regulatory Policy Committee might one day prod the self-regulatory-organization into prosecuting racism and sexism in the industry? Then again, one can imagine the awkwardness that such newfound zeal might impose upon Goldman Sachs General Counsel / FINRA Governor Ruemmler during the pendency of the sexism Class Action. All of which could motivate FINRA to tone down all that diversity and inclusion talk.

Inescapably, Ruemmler speaks out of both sides of her mouth as an industry General Counsel and as a FINRA Governor. Which places FINRA in an uncomfortable position when Ruemmler publicly opposes DOJ's expanded use of independent monitors for criminal settlements, some of which would likely involve Wall Street fraudsters. Similarly, Ruemmler's defense of her firm and its senior management against allegations of sexist misconduct may have a chilling effect on those questioning the diversity of FINRA's member firms and seeking to enroll the self-regulatory-organization in the fight against many forms of discrimination and harassment. Further, Ruemmler's involvement with the ongoing defense of Goldman against the Class Action may foster unease among other Board members and FINRA staff -- and that discomfort may manifest itself in not raising issues that should be raised.

The Thought Process (Or Lack Of One) At FINRA

In January 2021, were FINRA's Governors unaware of the decade-old Class Action alleging sexism at Goldman Sachs and the lurid stories emerging from other former female executives?

In January 2021, what was FINRA's Board of Governors thinking (or not) when it appointed Goldman Sachs' General Counsel to the Board and further seated her on two of FINRA's more important Committees -- at that moment in time, why did FINRA's Board of Governors appoint any Goldman Sachs General Counsel to serve on the Board?

Goldman Sachs pays its General Counsel Ruemmler a reported $17.5 million per annum to handle its legal affairs; and she's going to have spare time to serve as a FINRA Governor and also as a member of two FINRA Committees -- and all this while juggling her oversight of her firm's defense against the Class Action and voicing her opinions about incursions by DOJ/SEC/CFTC into Goldman's affairs?

It is now about two weeks since the negative November 15, 2022, press reports about the undisclosed $12 million settlement by Goldman with a former female partner and the attendant salacious allegations. I waited . . . I hoped for some response from the women on FINRA's Board. Some expressions of concern. Perhaps even a modicum of outrage. Despite the gravity of the disclosure by the press of allegations of sexual harassment/discrimination at Goldman Sachs, there is no evidence that any FINRA Governor has called for Governor Ruemmler's resignation or asked the Board to consider an appropriate response. Moreover, on November 22, 2022, Goldman Sachs Asset Management, L.P. agreed to pay a $4 million penalty pursuant to the settlement of SEC charges that it had failed to establish reasonable policies and procedures governing how it evaluated Environmental, Social, and Governance ("ESG") investments at two mutual funds and a separately managed account. "SEC Charges Goldman Sachs Asset Management for Failing to Follow its Policies and Procedures Involving ESG Investments" (SEC Release / November 22, 2022)
https://www.sec.gov/news/press-release/2022-209

I look at the composition of FINRA's Board and see many women and minorities. I look at the composition of the two FINRA Committees on which Ruemmler sits and I see diversity. All of which troubles me and it should trouble you too. There is no published report about any FINRA Governor having challenged the 2021 appointment of Goldman Sachs' General Counsel to the Board of Governors of Wall Street's leading self-regulatory-organization: at a time when Goldman Sachs was embroiled in a Class Action alleging sexism. Similarly, there was no published report in 2022 that any FINRA Governor had requested the resignation of Governor Ruemmler. It is now nearly 2023. The Governors' silence is deafening. As the poet Ella Wheeler Wilcox admonished "To sin by silence, when we should protest, Makes cowards out of men." In an updated, non-sexist revision of Wilcox's words, silence makes cowards out of men and women.

On June 11, 2020, some six months before Goldman Sachs General Counsel Ruemmler was appointed to FINRA's Board, FINRA's Board of Governors issued this statement

https://www.finra.org/about/governance/finra-board-governors/statement-bog-from-june-11-2020#:~:text=FINRA's%20mission%20is%20investor%20protection%20and%20market
%20integrity.&text=We%20are%20committed%20to%20continuing,the%20FINRA%20Board
%20of%20Governors:

We are grieved by the senseless death of George Floyd and other recent acts of violence against members of the Black and African American communities. We stand together with the FINRA community in our personal commitment to the principle of equal justice under the law and to fight all forms of racism and prejudice.

FINRA’s mission is investor protection and market integrity. We support management's determination to further enhance FINRA’s long-standing initiatives to pursue that mission with a diverse and inclusive workforce that represents all of society, and to expand our efforts to promote the financial literacy and capability of minority communities in collaboration with the FINRA Foundation. We are committed to continuing to increase the diversity of the FINRA Board of Governors. As a leader in the financial services industry, we also support management's determination to work collaboratively with others to promote greater diversity and inclusion across the industry, so that the industry can better engage traditionally underinvested communities and better represent and serve the needs of all investors.

And yet, six months after issuing the above June 2020 Statement, FINRA's Board appoints a General Counsel from a major member firm that is embroiled in a high-profile, tawdry Class Action alleging civil and human rights violations with an emphasis on a culture of sexism. Yes, those are all allegations. Yes, Goldman Sachs has every right to defend against the allegations and may well prevail. No . . . FINRA did not advance its purported commitment to "greater diversity and inclusion" on Wall Street by hand-picking Goldman Sachs' General Counsel to a sit on its Board on January 2021. A bad choice at a bad time.

None of this is about Ruemmler personally. All of this is about Goldman Sachs and the appropriateness of having that firm's General Counsel sitting on FINRA's Board at this moment in time with the pending Class Action and the swirl of troubling allegations. Again, this blog is not a personal attack against FINRA Governor Ruemmler; but it is an attack against FINRA and its lackluster Board of Governors. The investing public deserves better. The industry deserves better. What we need is advocacy and transparency. We need accountability. We need FINRA to act more like a regulator and less like some trade group on steroids. The corrosive influence of Wall Street politics eats away at the industry's regulators. This appears to be yet another instance. January 2021 was the wrong time for FINRA to appoint any Goldman Sachs General Counsel to its Board. During 2022, it was still a misguided appointment in need of rectification. In 2023, the concerns will only amplify.

May 2023: A Fish Rots From the Head Down

No FINRA Governor publicly spoke out against Ruemmler's appointment in 2021, or her continuing role on the Board in 2022 and 2023. This lack of advocacy comes off as rank hypocrisy when we consider "Report on Conflicts of Interest" (FINRA / October 2013)

https://www.finra.org/sites/default/files/Industry/p359971.pdf. which in part offer this laughable bit of insincerity:

“Tone from the Top,” Firm Culture and Conflicts of Interest

An effective practice for all firms is the establishment of a “tone from the top” that stresses the importance of ethical decision making and fair treatment of customers. This tone is set by a firm’s executive management in their day-to-day actions and decisions. It is incumbent upon them to consistently communicate and demonstrate the values to which they expect their employees to adhere, and to monitor employees’ behavior to ensure that it aligns with the firm’s stated values

Without the proper tone from the top, many of the measures discussed later in this report will be ineffective. Leadership that singlemindedly drives the distribution of proprietary products may undermine the effectiveness of new product review processes intended to protect customer interests. Conflict management frameworks cannot be expected to succeed without the strong support of a firm’s leaders.

Boards can play an important role in setting the tone from the top. Providing the board with visibility on significant conflicts a firm faces, as well as the firm’s overall approach to conflicts management, signals the importance the highest levels of the firm attach to addressing conflicts issues. Several firms report on conflicts issues to their boards, sometimes within the context of the firm’s risk management reporting.

It is important to note, though, that reliance on the “tone from the top” and a good culture is a first line of defense. To protect customers and the firm from the potential negative consequences of conflicts of interest, supporting structures, policies, processes, controls and training are critical.

I call upon all industry and investor advocates to demand the immediate removal of all sitting FINRA Governors and to insist that the self-regulatory-organization reconstitute its Board with Governors who will ensure that the regulator's culture adheres to a "tone from the top" approach. Further, until such time as FINRA demonstrates a sincere commitment to reform, all FINRA member firms should instruct their Executive Representative to not cast a vote for any candidate in any FINRA election by way of a boycott.

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A Call for Boycott: FINRA Board of Governors' Cowardly Silence Becomes Thunderous (BrokeAndBroker.com Blog)

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