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FINRA Rights Wrongs to Maintain Integrity

In August 2008, the Financial Industry Regulatory Authority (FINRA) provided the Securities and Exchange Commission with staff meeting minutes that had been altered, making the documents inaccurate and incomplete. FINRA’s Kansas City office was responsible for the tampering of the documents. FINRA officials know the agency must maintain its integrity in order to be a regulator for broker misconduct., so they have been diligent and cooperative in correcting this error. In response to the misconduct, FINRA re the matter to the SEC, implemented new leadership in the office responsible, improved their document-handling procedures and cooperated fully with an SEC review.

FINRA Rights Wrongs to Maintain Integrity

Changes intended to improve document-handling procedures were, according to FINRA, “additional online and live ethics training for all employees with an enhanced focus on document handling and integrity.” Furthermore, FINRA will create and release a document integrity podcast for current and future employees; include the subject of document integrity at yearly meetings, gatherings and district office visits; and train employees on past problems with document integrity. FINRA has also mandated that before undergoing an on-site exam, every business will meet with counsel and senior Office of Liaison staff before documents are released to the SEC.

FINRA has been ordered by the SEC to hire an independent consultant. The job of this consultant will be to review FINRA’s current training, policies and procedures, and then determine if they are adequate or require revision. The report will be submitted to and reviewed by the FINRA board. If they find the recommendations unreasonable, the board and the consultant will attempt to find an alternative solution that satisfies the same objectives. If a compromise can be reached, the consultant will amend the report. If a compromise cannot be reached, FINRA must comply with the original recommendation. Once the report is finalized, the board will have 30 days to implement all recommendations.

A press release issued by FINRA on October 27 stated that “as a regulator, FINRA must always hold itself to the highest standards. When we discover shortcomings, it is our obligation to take appropriate corrective action and make it clear that we have zero tolerance for actions that could compromise the integrity of our organization.”

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