As touched on by Gretchen Morgenson yesterday in her story “AIG to Sue Bank of America Over Mortgage Bonds,” investors are not able to rely on government regulators to police Wall Street and other major financial institutions. As a result, they must go out and hire private lawyers to not only prosecute but also investigate these deceptive business practices and frauds being perpetrated by the financial industry.
The problem of weak regulatory and enforcement action is even more of a problem when it involves the pseudo-private regulator known as FINRA.
Unlike the SEC and state regulators, which are subject to freedom of information and open government laws, the fruit of FINRA’s investigations is largely withheld from investors and their private attorneys. This is significant because when the SEC or a state regulator punishes a brokerage firm far more lightly than it should, at least private investigators can access much of the evidence of wrongdoing through the regulator.
In stark contrast, FINRA does not consider itself a government agency with respect to making information publicly available from investigations that result in paltry fines (For example, see my blog post “FINRA fine of UBS for Lehman notes deception is woefully weak.”
In other words, FINRA effectively refuses to share the evidence of its investigation with the investors it claims to support. This is especially disconcerting given the new move in Washington to transfer much more financial industry oversight to FINRA.
Contact Chris Vernon, founding partner of the Vernon Litigation Group law firm, at 239-649-5390. Vernon Litigation Group represents investors and businesses in arbitration and litigation involving all manner or fraud and financial and investment disputes.