POGO Calls for Increased Oversight of Financial Self-Regulators

For Immediate Release

Contact: 

Keith Rutter
Phone: 202-347-1122
Email: pogo@pogo.org

POGO Calls for Increased Oversight of Financial Self-Regulators

WASHINGTON - The Project On Government Oversight (POGO) sent a letter today
to the congressional committees tasked with financial oversight urging
them to challenge the government's reliance on private financial
self-regulators such as the Financial Industry Regulatory Authority
(FINRA).

FINRA, which oversees thousands of securities brokerage firms that
do business in the U.S., is just one of many self-regulatory
organizations (SROs) that feature prominently in the nation's financial
regulatory regime. In its letter to Congress, POGO argued that FINRA
and other SROs have an incestuous relationship with the industry they
are tasked with regulating, and therefore should not be trusted with
the important job of protecting the investing public.

Although FINRA is currently seeking to expand its authority and is
defending its record in paid advertisements, the organization actually
has an abysmal track record of regulating the securities industry. SROs
such as FINRA failed to prevent virtually all of the major securities
scandals dating back to the 1980s. And in recent years, under the
leadership of current Securities and Exchange Commission (SEC) Chairman
Mary Schapiro, FINRA failed to regulate many of the larger firms that
were at the heart of the financial crisis, including Bear Stearns,
Lehman Brothers, and Merrill Lynch, and also failed to detect the Ponzi
schemes run by Bernie Madoff and R. Allen Stanford. Amidst the economic
collapse of 2008 during which FINRA itself lost $568 million in its
investment portfolio, and despite its failure to adequately conduct
oversight of the securities industry, FINRA awarded its top 20 senior
executives $30 million in salaries and bonuses.

As POGO wrote in its letter to Congress, "the cozy relationship
between FINRA and the securities industry has resulted in pervasive
conflicts of interest, and ought to raise doubts about whether FINRA
can ever be an effective regulator."

“FINRA’s disastrous track record should be all the evidence Congress
needs to conclude that self-regulators can’t be trusted with protecting
investors,” said POGO Executive Director Danielle Brian. “Our fragile
economy shouldn’t be left in the hands of a regulator that’s in bed
with the same industry that brought the financial system to the brink
of collapse."

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The Project On Government Oversight (POGO) is an independent nonprofit that investigates and exposes corruption and other misconduct in order to achieve a more effective, accountable, open and honest federal government.

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