FINRA/SRO sunshine, reasoned arbitration, fines to Treasury, cost-benefit and IG oversight
Absent merging FINRA into SEC, Mandate demands public FINRA board meetings/agendas/minutes/rule proposals, public arbitrations with reasoned awards subject to SEC/judicial review, SRO fines to Treasury or investor fund (not SRO coffers), cost-benefit analysis, pre-SEC public comment, annual SRO reports to Congress, annual oversight hearings, DFE/IG status for FINRA/MSRB/NFA, and detailed SEC/CFTC annual SRO supervision reports.
Mandate
Mandate Ch. 27 (Financial Regulatory Agencies) — Improved Regulation of Industry and SROs: absent merging FINRA into SEC, require public Board meetings (unless executive session), advance agendas, prompt minutes, advance rulemakings, public/reported arbitration and disciplinary hearings; require FINRA arbitrators to make findings of fact and reasoned awards (except very small claims) subject to SEC and limited judicial review; require all SRO fines go to investor reimbursement fund or Treasury; require meaningful cost-benefit analysis for major SRO rules; require proposed-format publication and public comment before SEC/CFTC submission; require annual SRO reports to Congress; Congress should conduct annual oversight hearings; make FINRA/MSRB/NFA Designated Federal Entities with an IG or place them under an existing IG; require SEC and CFTC detailed annual reports on SRO supervision.
Undo plan
1) Adopt sunshine, reasoned awards, and fine-destination reforms that improve accountability without abolishing SRO model.
2) Protect confidential customer info in public hearings via redaction rules.
3) Create investor reimbursement fund governance independent of enforcement incentive distortion.
4) Establish IG coverage for financial SROs with dual-reporting to Congress.
5) Verify: percent of reasoned awards; fine remittances to Treasury/fund; annual SRO reports filed.