Senator Elizabeth Warren (D., Mass.) is questioning the leadership of Finra, the brokerage industry’s self-regulatory body, about its enforcement practices, suggesting a decline in regulatory vigilance.
In a letter to Finra CEO Robert Cook, Warren referenced a June Bloomberg report highlighting a drop in enforcement actions and a hesitance to publicize penalties. Warren emphasized that Finra’s mission is to “protect investors and promote market integrity,” but argued that such protection is impossible if regulatory enforcement is lax.
Warren’s letter includes a comprehensive set of questions regarding Finra’s investigations since 2016, the extent of public disclosure on enforcement actions, and changes resulting from Finra360, the organization’s internal review. She requested detailed responses by September 13.
A Finra spokesperson confirmed receipt of the letter, committing to respond by the deadline but declined to comment further.
According to Bloomberg, Finra’s enforcement actions reached a historic low last year, with total fines assessed at about half the amount imposed in 2016. Warren described this trend as “deeply troubling,” interpreting it as evidence of a possible intentional shift towards deregulation.
Finra, on the other hand, suggested that its recent enforcement efforts have been so effective that there are fewer industry bad actors, leading to fewer cases.
Warren remains skeptical, contrasting Finra’s enforcement decline with steady numbers from the Securities and Exchange Commission (SEC), which oversees Finra. “There is no evidence supporting Finra’s claims,” she noted, underscoring that the SEC’s enforcement activity has remained consistent.
Warren’s history of challenging Finra includes questioning the robustness of its enforcement operations, criticizing policies that allow brokers to clear customer complaints from their records, and opposing its reliance on arbitration to resolve disputes.
In her current inquiry, Warren is seeking specific data on the number of investigations Finra has initiated annually since 2016, the origins of these probes, and the outcomes, including fines, suspensions, or expulsions. Additionally, she wants to know how many enforcement actions were publicized and the criteria for issuing press releases.
Warren concludes by demanding evidence for Finra’s claim of reducing the number of bad actors over time, a justification given for the decline in enforcement.
