Senator Elizabeth Warren has once again set her sights on the Financial Industry Regulatory Authority (FINRA), questioning the agency’s commitment to investor protection and market integrity. In a recent letter to FINRA CEO Robert Cook, Warren highlighted a significant decline in enforcement actions and fines over the past seven years, coinciding with the agency’s “transformation initiative” aimed at improving efficiency.

A Dramatic Decrease in Enforcement

According to Warren, FINRA’s enforcement actions have plummeted since 2015, with the agency issuing just 426 actions last year – a twofold decrease from its peak. The financial impact of these actions has also diminished, with fines totaling $88.4 million in 2022, compared to $173.8 million in 2016.

This sharp decline in enforcement activity has raised eyebrows, especially when contrasted with the relatively steady enforcement numbers from the Securities and Exchange Commission (SEC). Warren expressed skepticism about FINRA’s claim that the decrease is due to a reduction in “bad actors” in the industry, stating there’s “no evidence to that effect.”

Transparency Concerns

Adding to the controversy, Warren noted a decrease in press releases issued by FINRA regarding its enforcement actions. This reduction in public communication has led to concerns about the agency’s transparency and its ability to effectively deter misconduct in the financial industry.

A Pattern of Scrutiny

This latest inquiry is not Warren’s first clash with FINRA. The senator has previously questioned the agency’s practices, including:

  • Allowing brokers to remove customer complaints from their records
  • FINRA’s response to the GameStop trading controversy
  • The agency’s overall ability to protect consumers

Requesting Accountability

In her letter, Warren has requested detailed information from FINRA, including:

  • Annual data on investigations, enforcement actions, and fines since 2016Information on FINRA’s press release practices
  • Details about the agency’s transformation initiative and its impact on enforcement policies
  • Evidence supporting the claim of a reduction in “bad actor firms and individuals”

Warren set a deadline of September 13,2024 for FINRA to respond to these questions, with SEC Chair Gary Gensler copied on the correspondence.

Broader Regulatory Landscape

This scrutiny of FINRA is part of Warren’s broader push for stricter financial regulation. The senator, who serves on the Senate Banking Committee, has recently:

  • Criticized Federal Reserve Chair Jerome Powell over delayed rules on executive compensation
  • Called for the finalization of Basel III to strengthen bank capital requirements
  • Questioned the Office of the Comptroller of the Currency’s approval of a significant bank merger

As the financial industry continues to evolve, Warren’s persistent oversight highlights the ongoing debate over the balance between regulatory efficiency and robust investor protection. The response from FINRA and potential actions from other regulatory bodies will be closely watched by industry observers and consumer advocates alike.