The Wall Street Journal reports this morning that Susan Merrill, who announced last month that she is stepping down as head of enforcement at the Financial Industry Regulatory Authority (FINRA), has decided to join the New York office of Bingham McCutchen, where she will “lead Bingham's enforcement practice and advise clients on regulatory and securities enforcement matters.”
As we wrote last month, Merrill is leaving FINRA following a period in which the organization took a decidedly light approach to regulating the securities brokerage industry. In addition to missing the Madoff and Stanford Ponzi schemes, FINRA has also come under criticism in recent years for its overall decline in enforcement stats, for coming down heavily on its smaller member firms while ignoring the larger broker-dealers whose excessive risk-taking helped to fuel the financial meltdown, and for liquidating its $647 million portfolio in auction-rate securities without informing the investing public, among other things.
In our letter to Congress calling for increased oversight of FINRA and other self-regulatory organizations (SROs), we highlighted Merrill’s previous position at Davis Polk—where she represented broker-dealers, investment advisers, and other firms before the SEC and various self-regulators—to illustrate how FINRA is overly cozy with the industry it is tasked with regulating. The AmLaw Daily reports that Merrill was seriously considering an offer to return to Davis Polk before settling on Bingham.
The AmLaw Daily also points out that Merrill will be joining other former regulatory and enforcement officials at her new gig, including former SEC Chairman Christopher Cox, and former SEC enforcement official Herbert Janick, III, who, according to Merrill, played an influential role in convincing her to join the firm.
We would highlight Merrill’s move to Bingham as another example of the revolving door between government regulators and the financial services industry, but that might suggest that Merrill actually entered the government to begin with. While SROs such as FINRA have the authority to act like government regulators—and to enjoy absolute immunity from private damages suits—FINRA is technically a private entity, which explains how Merrill was able to make a tidy $1.4 million working for the organization in 2008.
No word yet on who will be replacing Merrill as the head of enforcement at FINRA, but as we wrote in our letter to Congress, POGO questions whether FINRA can ever be an effective regulator given its incestuous relationship with the securities industry.
-- Michael Smallberg