Finra small-firm board members defend ombudsman

Small firms shouldn’t fear retaliation if they complain to the Financial Industry Regulatory Authority Inc.’s ombudsman, according to the small-firm representatives on Finra’s board of governors.
In an e-mail update sent to member firms late Monday, the three small-firm governors said they’ve heard that Finra members “are reluctant to speak with Finra supervisors when an issue arises during an exam, for fear of reprisal.”
Finra members should feel free to turn to Finra’s Office of the Ombudsman for help, they noted.
The three board members, Jed Bandes, Joel Blumenschein and Ken Norensberg, said Finra ombudsman Cindy Foster, who hears complaints from members, assured them that a firm “will never suffer a reprisal from staff for raising an issue with the ombudsman.”
The ombudsman’s office is not answerable to Finra management and has a separate committee that funds its operations, the e-mail said.
The three board members said they were “extremely skeptical” before a recent meeting with Ms. Foster because the ombudsman’s office has been a “sore point with members,” they wrote.
Part of the problem is that the ombudsman’s office is misunderstood, Mr. Norensberg said in an interview.
Ms. Foster cannot “wave a magic wand” and take care of a problem, said Mr. Norensberg, managing director of Luxor Financial Group Inc.
The Finra ombudsman’s office can help members work through issues and it reports “thematic issues” to Finra’s management, the board members said.
Retaliation against specific firms “will not be tolerated at all,” Mr. Norensberg said.
“If a member doesn’t say anything, how will Finra ever find out [about problems]?” he added.
Finra’s continuing membership application process, which requires firms to get approval for expanding their businesses by a certain amount, is also a common complaint among member firms, the e-mail said. It also indicated that the regulator’s s exam program has caused an “extreme amount of frustration” among broker-dealers.
Mr. Blumenschein is president of Freedom Investors Corp., and Mr. Bandes is president of Mutual Trust Company of America Securities Inc.

Related Topics: Financial Industry Regulatory Authority