Finra top cop Susan Merrill departing

Susan Merrill, the enforcement director at Finra, informed her staff Wednesday that she plans to step down.

Her departure date has yet to be determined, the Financial Industry Regulatory Authority Inc. said in a statement. A search for a successor is under way.

The chief of enforcement is responsible for the management of about 300 enforcement staff members in 17 offices across the United States, according to Finra.

Ms. Merrill was head of enforcement at the New York Stock Exchange for three years before she joined Finra in 2007. That was the year that Finra was created through the merger of NYSE’s regulatory unit and NASD.

“I had a vision of one unified enforcement department, a place where all of us had the opportunity to make a difference for investors,” Ms. Merrill said in a statement. “I believe that we have truly formed one team.”

Ms. Merrill’s exit, however, marks the second high-profile departure at the self-regulatory organization in a little more than a month. Last month, Robert Errico, Finra’s executive vice president of member regulation, indicated that he planned to leave the regulator at the end of this month.

In her statement, Ms. Merrill noted that she is “especially proud of the actions we brought regarding auction rate securities [and] mutual fund and variable annuity violations, as well as vigorous actions to shut down Ponzi schemers.”

But not all observers have been thrilled by Finra’s approach, particularly in instances of industrywide conduct.

“Rather than bring enforcement actions like they did with ARS or with [mutual fund] B shares, it would be better if [Finra] just issued regulatory notices,” said Brian Rubin, a defense attorney at Sutherland Asbill & Brennan LLP.

He did note that he thinks there is a place for Finra to bring actions against firms or individuals for out-and-out fraud.

“But a lot of cases we’ve seen are more regulatory foot faults than something that leads to investor harm,” Mr. Rubin said.

He thinks that most in the industry would like to see a replacement for Ms. Merrill who has had some experience on Wall Street.

But it remains to be seen if her departure will mark a departure for Finra as well.

“My hope is, with her stepping down, they can do a Mulligan and re-evaluate whether they are really going after … the large-scale perpetual violators,” said defense attorney Richard Roth, a partner in an eponymous law firm.

Indeed, the exit of Finra’s top cop comes in the wake of criticism aimed at the regulator for failing to detect massive investment frauds, including the Ponzi scheme orchestrated by Bernard Madoff.

“They’ve got teams of lawyers on [small] cases I have,” Mr. Roth said. “But nobody seems to be walking into a Madoff with the same zeal.”

E-mail Dan Jamieson at [email protected].