Finra to Examine Securities-Backed Lending Practices

The increased number of investors borrowing against the value of their portfolios has caught the eye of Wall Street’s self-regulator. At banks and brokerages, securities lending has become more popular with customers who use the low-interest-rate loans to purchase everything from homes to luxury items such as yachts at a time credit has been tight. More in the Wall Street Journal [...]

Ketchum: What this industry is missing when it comes to CARDS

Finra must demonstrate how its controversial data-collection system will benefit investors in order to quell mounting criticism of the proposal, the organization’s leader said Friday. “We think the benefits are absolutely obvious, but we recognize it’s always our obligation to look closely at costs,” said Richard Ketchum, Financial Industry Regulatory Authority Inc. chairman and chief executive. “We’d be delighted to quantify [the benefits],” he said at a Consumer Federation of America conference in Washington. “I think that’s in the hundreds of millions of dollars from the standpoint of potentially averted investor harm.” More on Investment News [...]

Finra expected to adopt CARDS despite vocal industry resistance

Despite strong industry resistance, Finra is expected to adopt a controversial proposal to implement an automated tracking system to detect abusive broker conduct. “They’re going to go through with it,” said Linda Riefberg, a partner at Cozen O’Connor and a former chief counsel for Finra enforcement. “They don’t have to have firms’ approval. Finra, and presumably the [Securities and Exchange Commission], believes this is a way to strengthen their investor protection.” The Financial Industry Regulatory Authority Inc., the self-funded broker-dealer regulator, sees its Comprehensive Automated Risk Data System, or CARDS, as a way to use technology to make itself a more effective and nimble regulator. More on Investment News [...]

Finra survey shows investors want more regulatory protection

Investors want more regulatory protection and are willing to pay higher brokerage costs to get it, a new Finra survey shows. On Thursday, the Financial Industry Regulatory Authority Inc., the industry-funded broker-dealer regulator, released a study showing that 92% of investors say it’s important to have a “cop on the beat” to protect them from malfeasance in the markets and that 74% support “additional regulatory protections.” More than half (56%) would favor enhanced regulation even if it resulted in “a minimal increase” in costs that brokerage firms pass on to investors. The rest of the study participants split between opposing additional regulation if it meant higher costs (22%) and having no opinion (22%). More on Investment News [...]

UPDATE 1-FINRA names Richard Berry head of securities arbitration

The Financial Industry Regulatory Authority on Thursday named a long-time official, Richard Berry, as the new head of its securities arbitration unit. Berry will replace the head of FINRA’s arbitration unit, Linda Fienberg, who retires at the end of November after 18 years in her current job. He is presently the unit’s director of case administration, and will become the executive vice president and director of dispute resolution on Dec 1. His appointment was reported exclusively by Reuters earlier on Thursday. More on Reuters [...]

Restitution after a Ponzi scheme collapses

We’re continuing to play around with some questions in the law of restitution, which is the subject of a new book I’ve written. Here’s another. A Ponzi schemer takes $10,000 of my money and $10,000 of yours. Then he is caught. We gave him our money in cash, and he kept it separate. My money has all been spent. Your money is still sitting in a briefcase (or envelope) on his desk. Do you get all of your money back, or do we share it? The older rule was that you took all of your money back. The schemer never got good title to it (his title was “voidable”); so until your money gets mixed with someone else’s so that it can’t be identified, you can always reclaim it. This isn’t a question of what’s fair to me. The money is yours, and did not stop being yours when you were tricked into handing it over. More in the Washington Post [...]

Finra’s CARDS plan is likely to be a game changer

Released for public comment Sept. 30, CARDS Version 2.0 is an ambitious effort by the Financial Industry Regulatory Authority Inc. to develop mega-data on the brokerage industry and its millions of customer accounts for enforcement purposes. While the regulated don’t generally share the regulator’s enthusiasm for the Comprehensive Automated Risk Data System, it is likely to be implemented. When it is, CARDS promises to be a game changer in a number of ways, including some that may impact the fiduciary debate. More on Investment News [...]

Wall Street watchdog, US states mull new system to clean up brokers’ records

Wall Street’s industry-funded watchdog and U.S. state securities regulators are considering whether to develop a new type of regulatory process for brokers to follow for erasing complaints from their public records, an official said on Thursday. The Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) have been engaged in preliminary discussions about whether to revamp the process that most brokers use for requesting so-called “expungements,” said Linda Fienberg, who heads FINRA’s arbitration unit. More on Reuters [...]

Rep. Garrett to FINRA: Hold Off on CARDS

Rep. Scott Garrett, R-N.J., chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, told the Financial Industry Regulatory Authority on Tuesday to hold off on its “costly and burdensome” plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System (CARDS). “After a preliminary reading of the proposed rule, I remain far from convinced that this new, costly and burdensome proposal is needed,” Garrett said in a statement. More on Think Advisor [...]

Report: Arbitrations may be unfair to investors

The Financial Industry Regulatory Authority arbitration pools that decide many investor disputes with brokers lack diversity, raising the prospect the system may be “unfair,” a new report charged Tuesday. Issued by an organization of lawyers who represent aggrieved investors, the report found that the Wall Street self-regulator’s arbitration pool is roughly 80% male, signaling under-representation of women. More on USA Today [...]