The Future of Self-Regulation
The Financial Industry Regulatory Authority (FINRA), the largest US self-regulatory organization (SRO) for securities firms, has come under fire regarding the effectiveness of its performance. Created "in July 2007 through the consolidation of NASD and...the New York Stock Exchange," FINRA "touches virtually every aspect of the securities business" including "examining securities firms; writing rules; enforcing those rules and the federal securities laws...."

The Project On Government Oversight (POGO), an NGO, has raised questions about financial self-regulation. A POGO press release states that financial SROs are "at least partly to blame for the economic crisis we now face" and believes that the next "SEC Chairman must be prepared to question the orthodoxies on which the existing structure is based and to face down powerful and deeply entrenched industry interests."

An article in the Wall Street Journal noted that FINRA "missed the mortgage crisis and Bernard Madoff's alleged $50 billion Ponzi scheme." The article also recognized that "Finra's jurisdiction was limited to inspections of brokerage accounts, whereas the Madoff scandal took place outside those accounts. However, according to an SEC report in 2005, Mr. Madoff maintained -- falsely, it later turned out -- that his business involved managed brokerage accounts, a business within Finra's purview." The article stated that some "securities lawyers and others say Finra should have at least asked more questions about the entire Madoff operation."

Madoff stole billions of dollars from charities and private investors, large and small. Many of these investors have a much more limited future as a result of Mr. Madoff's crimes. Similarly, any regulatory body, private or governmental, that allows Madoff-type operations to go unchecked, should also have a limited future. There is a need for an overhaul of the governmental and private sector processes by which financial firms are regulated.

See POGO statement