Finra board member resigns in wake of charges

Joel Blumenschein, an industry governor for the Financial Industry Regulatory Authority Inc., has resigned his board seat after feeling pressure to step down following recent charges in a failure-to-supervise case.

Joel Blumenschein, an industry governor for the Financial Industry Regulatory Authority Inc., is no longer on the board.

He faced growing pressure to step down after InvestmentNews reported last week that he had settled failure-to-supervise charges brought by Finra enforcers last September.

Last month, Mr. Blumenschein agreed to a suspension as a principal for three months and a fine of $30,000 in the case.

“I felt it was the honorable thing to do,” said Mr. Blumenschein, president of Freedom Investors Corp. of Brookfield, Wis., “It’s not good for Finra if I sit there” on the board.

Mr. Blumenschein was one of three independent small-firm candidates elected to the Finra board in August 2010.

His case marks the second time a small-firm Finra governor has left the board in the wake of regulatory proceedings.

In 2008, Richard Goble, head of North American Clearing Inc., resigned his post after the SEC charged him with misusing customer money market funds in an attempt to keep his struggling firm afloat.

Last year, a federal judge found Mr. Goble guilty, permanently barred him from the securities industry and ordered him to pay a $7,500 fine.

Mr. Goble has appealed that decision.

Like Mr. Blumenschein, Mr. Goble was a successful petition candidate for the Finra board.

Under Finra rules, petition candidates can challenge board member candidates nominated for industry seats by a Finra nominating committee.

The Finra board has 22 members, seven of them industry seats.

Finra spokeswoman Nancy Condon said the regulator plans no changes to its by-laws, which govern elections.