An analysis conducted out of Sutherland Asbill & Brennan’s Washington office shows the Financial Industry Regulatory Authority—the independent securities regulator that shares some authority with the Securities and Exchange Commission—was light on enforcement in 2008, similar to its public sector partner.
"FINRA may have been affected by the SEC’s well-publicized retrenchment on the enforcement front," concluded the report’s authors, Sutherland partners Deborah Heilizer and Brian Rubin, and associate Shanyn Gillespie.
Mary Schapiro was the chief executive of FINRA in 2008, when Christopher Cox chaired the SEC. Now herself SEC chairman, Schapiro has been a vocal critic of the lax attitude toward enforcement that dominated during Cox’s tenure. She’s taken quick action to roll back several of his policies. But, according to the Sutherland report, her independent operation wasn’t doing much better.
According to the Sutherland lawyers’ analysis, FINRA fined securities firms and individuals approximately $35 million in 2008, a 55 percent drop from 2007, and a steady decline from 2005, when fines peaked at $184 million. (FINRA was formed in 2007 through the consolidation of the National Association of Securities Dealers and certain functions of the New York Stock Exchange. To determine fines prior to its creation, the report’s authors combined fines leveraged by the securities dealers association and the New York Stock Exchange, and used the aggregate results.)
Co-author Rubin, a securities litigator at Sutherland and a former deputy chief counsel at the National Association of Securities Dealers, points out that FINRA and the SEC often bring parallel actions and refer cases to one another. It’s therefore logical that their priorities would overlap.
Still, he said Schapiro has a proven record of being a tough regulator. Prior to heading FINRA, she was president of the National Association of Securities Dealers. Rubin praised her leadership there.
"It had been severely criticized, it had been sanctioned by the SEC, and she turned around the NASD," he said. "So I expect she will do the same with the SEC."
FINRA has yet to release its own annual review for 2008. A FINRA spokesman declined to comment on the Sutherland lawyers’ findings.