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February 26, 2015

In Push for Change, Finra Is Opposed by the Wall St. Firms It Regulates

“Wall Street has pulled out all the stops in opposing a plan by its own self-regulator to require brokers to share extensive information about their clients’ accounts.

“The proposal by the Financial Industry Regulatory Authority, or Finra, is “a troubling and serious threat to investors’ civil liberties and constitutional rights,” Carrie L. Chelko, chief counsel of the Philadelphia financial firm Lincoln Financial Network, wrote in one of hundreds of letters to the agency criticizing the plan.

“Finra argues that regular, monthly reports from brokers detailing purchases, sales, margin calls and risk profiles will give it a chance to stop abusive practices before further harm is done.

“Finra is considering the feedback on its plan, called the Comprehensive Automated Risk Data System, or Cards, and making changes in advance of seeking approval from its board of governors and forwarding a proposal to the Securities and Exchange Commission, Finra’s chief executive, Richard G. Ketchum, said in a telephone interview.

“Finra has often been dismissed as an apologist for the Wall Street firms that finance it, but it has made some efforts since the financial crisis to play a tougher role. It fought the discount brokerage firm Charles Schwab & Company in 2012 after the firm tried to force customers to waive their rights to bring class-action lawsuits, winning its case last April. It also strengthened its standards for brokers who are making investment recommendations, advising them that a product must be consistent with a customer’s best interest. Several powerful investor advocacy groups, including AARP and the Consumer Federation of America, have applauded Finra’s plan, noting that it would allow agency regulators to match the 21st-century data capabilities of the Wall Street firms it regulates. But the brokerage firms that pay Finra to be their regulator say that keeping so much investor information in one place is an example of regulatory overreach and an invasion of customers’ privacy.”

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Read the full New York Times article by Susan Antilla here.

 

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