Congress's investigative arm says Wall Street's self-regulatory organization only has limited oversight from the SEC.
By MICHAEL SMALLBERG and ANDREW WYNER
As the House Financial Services Committee considers legislation to create a private self-regulatory organization (SRO) for investment advisers, a recent Government Accountability Office (GAO) report has raised serious concerns about the inadequate oversight of the Financial Industry Regulatory Authority (FINRA), the largest existing SRO for the securities industry.
The GAO’s report falls in line with POGO’s view that FINRA and other SROs, which operate with significant authority, have not been subject to the same level of oversight that applies to government agencies.
FINRA has argued that it is “subject to comprehensive oversight” by the Securities and Exchange Commission (SEC). But the GAO’s report found that the SEC’s oversight of FINRA is “varied, with some programs and operations receiving regular oversight and others receiving limited or no oversight.”
For instance, the GAO found that the SEC has never reviewed the lucrative compensation packages provided to FINRA’s executives (POGO recently noted that FINRA’s top ten executives received nearly $13 million in pay and benefits in 2010). And the SEC has only been able to provide occasional oversight of FINRA’s finances and governance.