As I am (probably too) fond of reminding people, I was an English major, and pride myself, at least to some degree, on my ability to use words effectively to communicate clearly. I get easily frustrated, therefore, when I read or hear something that was purportedly designed to relate a specific message, but the message is nevertheless muddled, even if deliberately. This happens all the time, for example, in politics. Politicians are notorious for talking (and talking and talking) without actually saying anything. It is also true in business. It is an art for a corporate Marketing Department to be able to describe some product as “new-and-improved” when, in fact, it’s really neither, and any actual changes are simply cosmetic, likely in the packaging.
These were the thoughts that ran through my mind this morning when I read FINRA’s press release announcing its “Plan to Consolidate Examination and Risk Monitoring Programs!” It sounds intriguing, right? I mean, member firms complain tirelessly about over-regulation and redundant inquiries. So, anything that could result in a more focused approach to regulation, with a resultant reduction in effort and expense, seems like a good idea.
But, as I read the press release, I found myself scratching my head, trying to divine just what it was that FINRA had announced. According to FINRA, its “examination responsibilities are currently divided among three different programs responsible for business conduct, financial and trading compliance. The consolidation will bring those programs under a single framework designed to better direct and align examination resources to the risk profile and complexity of member firms.” Hmm. I read that last sentence three times. Is it simply saying that FINRA will spend more time, energy and money examining firms that it deems to be “risky” and “complex,” however those words are defined? If so, isn’t that exactly what FINRA already does?
Without a doubt, FINRA already purports to utilize a risk-based examination program, one that results in “risky” firms receiving more attention than their vanilla peers. FINRA’s website, on its most basic page – “What We Do” – explains FINRA’s job like this: “Every day, hundreds of professionally trained FINRA financial examiners are in the field taking a close look at the way brokers operate, with a focus on the greatest risks to the markets and investors.” Given language like this, which is repeated all over the website, I hope you can understand, then, my confusion over today’s press release that seems to suggest FINRA’s determination to employ its examination resources in a more “directed” manner somehow represents something new.
My favorite example of corporate-speak on this subject was the following remarkable quote, from the EVP that FINRA apparently hired to honcho this novel, ground-breaking approach to examinations: “After careful consideration and extensive feedback from internal and external stakeholders, we are moving toward a program structure that is based on the firms we oversee.” Seriously? Is there a possible basis for FINRA’s “program structure” other than the firms that it oversees? I suppose FINRA could base its exams on, say, the eye color of the CCO, or the kind of car that the FINOP drives, but that would hardly be scientific. Yes, much better to design a firm exam program that focuses instead on the firms.
And, if a firm-based exam program is where FINRA is “moving toward[s],” as the EVP states, where is it supposedly moving from? Her quote clearly reflects that currently, FINRA’s exam program is not firm-based. If so, then on what is it based? And what has it been based on for the last decade or so? Again, in light of FINRA’s insistence that the exam program is already risk-based, I am truly at a loss trying to figure this press release out.
Maybe it was just poor draftsmanship of the press release; maybe, in fact, FINRA is about to embark on something that will truly result in more streamlined exams being conducted by better trained examiners who are well versed in the business of the firms they examine, resulting in quicker and more reasonable dispositions than members presently experience. I hope that is the case, but, as with most things that FINRA announces, only time will tell.