The Securities and Exchange Commission is reportedly looking into the compensation paid to executives at the Financial Industry Regulatory Authority (FINRA). The SEC is also interested in a lack of transparency regarding FINRA’s governance and operations. The SEC’s interest in these matters comes at the behest of the Government Accountability Office, which has called on the SEC to strengthen its oversight of FINRA.
The GAO is the investigative arm of Congress. According to the GAO, the SEC has failed to properly oversee FINRA’s executive pay packages and internal operations.
FINRA is the securities industry’s “self-regulatory” organization. FINRA is funded by the securities firms whose sales practices it is charged with overseeing. FINRA desires to expand its domain to include oversight of investment advisors that are not broker-dealers already being overseen by FINRA.
The Project on Government Oversight, a watchdog group, has criticized FINRA’s executive pay packages calling them “excessive” for a non-profit in paying its top 10 executives almost $13 million in 2010. The group contends that such generosity makes FINRA’s leaders indebted to the securities industry, and less likely to take actions to reign-in inappropriate sales practices. Some observers have criticized both the SEC and FINRA for being captive agencies.
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