FINRA’s “Olympic” Disgrace: Its Reg BI Report

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Here’s rough justice: FINRA’s February 9 disgraceful report on broker-dealer breaches of Reg BI came out just as the Winter Olympics was tarnished by the politics of the IOC.

It was management failure, where fair play and enforcing the rules lost out to political interests. It’s not the outstanding athletic achievements (i.e., Norway’s leading medal count 😊).

Casualties matter. Unabated conflicts eat away at investor returns and the Olympic spirit is beaten.

The Wall Street Journal called these Olympics “grim” and editorialized for reforms.

The same should be said for Reg BI.

The FINRA report appeared to be serious. FINRA called its findings “noteworthy.”

The findings described 19 deficiencies in 453 words. Four tenets underpin those deficiencies:

  • Policies and procedures were not “designed to achieve compliance” with Reg BI.
  • Training failed to prepare staff to comply with Reg BI.
  • Conflicts were not identified or, if identified, not adequately addressed.
  • There was a failure to provide full and fair disclosure of all material facts.

How did FINRA describe the upshot of those deficiencies?

“Failure to comply with the care obligation – Making recommendations that were not in the best interest of a particular retail customer.” (Emphasis added.)