FINRA CEO on Change: “We must avoid incrementalism or convenient compromises when bold action is required”

At the annual FINRA Conference in Washington, DC, this week FINRA President and CEO Robert Cook took the stage to talk about change.  In a speech entitled A Changing Industry – A Changing Industry, Cook reflected on his initiative to build a better FINRA.  In recent years FINRA had earned a reputation of being tone-deaf and ham fisted in some of their activities. Regulated broker dealers had gotten into the habit of speaking in hushed tones when speaking about the financial regulator. Their legal representatives were more outspoken but hesitant to discuss grievances on the record. To address these concerns, Cook, who was only appointed in mid-2o16, launched FINRA360: a top to bottom review of the agency that is receiving feedback from both inside and outside the organization.  Topics addressed by FINRA360, include:

  • The organization and operation of FINRA’s regulatory functions, including whether they are optimal for sharing information and establishing consistent standards across FINRA;
  • The use of data and technology throughout FINRA, including how they can best support efficient operations, decision-making, and policy-making; and
  • The tools and metrics used to assess outcomes and success across FINRA’s various regulatory programs and support functions.

During Cook’s speech he clarified;

“First and foremost, we must remain focused on how to best fulfill our core mission – promoting investor protection and market integrity while facilitating vibrant capital markets. Potential changes must be evaluated based on the extent to which they will advance this mission.”

Cook is encouraging collaboration, transparency and accountability throughout the agency.

So is this a new world at FINRA?

Only time can answer this question but Cook’s public posture and comments are encouraging.

Regarding Fintech, Cook believes FINRA must support innovation in the financial sector. Internally, FINRA has a committee that is actively identifying and prioritizing topics pertaining to Fintech. But Cook wants to do more.

“In the near future, we expect to launch a FINRA Innovation Outreach Initiative to proactively engage with those in the securities industry seeking to develop or utilize new financial technology applications and other innovations,” stated Cook. “This initiative will help FINRA better understand these innovations and how we can foster a collaborative environment for productive interactions with firms operating in this space. It may also allow us to identify areas where we may want to consider adapting our regulatory approach to take into account evolving business models and risks.”

First on their list is a Distributed Ledger Technology or Blockchain Symposium which will be held in New York City on July 13th.

FINRA plays a vital role in the securities industry. The hybrid SRO-governmental regulator oversees thousands of professionals in the securities industry. Enacting change in any large group is tall task – and it takes time. Perhaps the best quote of Cook’s speech was the following;

“… a final principle is that everything must be on the table. We must avoid incrementalism or convenient compromises when bold action is required.”

And as we all know, fortune favors the bold.

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