The U.S. Financial Industry Regulatory Authority (FINRA) is reviewing its committee structure, rule-making process, and other aspects of its operations as part of an effort to improve its interaction with the industry and the investing public.
The U.S. investment industry’s self-regulatory organization (SRO) issued a special notice on Tuesday in which it seeks comment on how FINRA could enhance its engagement with broker dealers and other stakeholders.
This engagement helps inform the regulator about brokerage business models, industry conditions and possible emerging investor protection issues, the notice states. In addition, providing insight into the SRO’s efforts helps the industry and others provide FINRA with more useful feedback and bolsters public confidence through regulatory transparency.
The notice focuses on FINRA’s committees, its rule-making process, member relations and related programs. Also, it seeks comment on how it can “enhance these programs to promote its mission and its effectiveness as an SRO.”
“Being an effective SRO that protects investors while promoting vibrant capital markets requires that FINRA engage member firms and the public in meaningful dialogue,” says Robert Cook, FINRA’s president and CEO, in a statement. “FINRA invests significant resources in its current engagement programs, and we are exploring how these programs can be made more effective without compromising our regulatory responsibilities. Requesting comment is an important part of that evaluation.”
FINRA’s notice indicates that the SRO has to balance industry involvement with the need to remain independent as a regulator: “Insufficient member engagement may result in FINRA failing to fully achieve the benefits of its SRO model. On the other hand, inappropriate member influence on regulatory programs could result in the failure to adequately proscribe, sanction and deter behaviour that may harm investors and markets or undermine public confidence in the regulation of the broker-dealer industry.”
“We commend FINRA’s initiative to engage with the industry, and all stakeholders, to solicit feedback and foster an environment to improve its important role as an SRO, says Kenneth Bentsen, Jr. president and CEO of the U.S. industry trade group the Securities and Financial Markets Association (SIFMA), in responding to the notice. “SIFMA looks forward to providing thoughtful comments and input reflecting our members’ concerns and feedback.”
The initiative comes in the wake of FINRA’s recent pledge to evaluate various aspects of its operations and programs. The SRO says that more information will be provided on that project, called FINRA360, in the coming months. Comments on Tuesday’s notice are due by May 5.