At FINRA, the ‘How’ Matters


This article first appeared in the magazine of the STA’s 84th Annual Market Structure Conference, which was held Sep. 13-15 in Washington, D.C.

The challenges a new chief executive officer faces are at times influenced by the state of affairs left to them by their predecessor.

A CEO replacing an unpopular or ineffective one will encounter a different set of challenges than had the previous executive been well-liked and productive. This is not to say the challenges of former set of circumstances are easier than the later, they are just different and as such require a different approach.

Robert Cook, FINRA

Consider the situation of Robert Cook, Financial Industry Regulatory Authority’s new CEO. Cook’s challenges have been influenced by the fact that he replaces the well-known, well-respected and well liked — both internally and externally — Richard ‘Rick’ Ketchum, a 37-year industry stalwart who among his many achievements sat atop our nation’s largest independent regulator for all securities firms doing business in the United States for more than 15 years. Since assuming the CEO position in 2009, Ketchum managed FINRA and its 3,500 employees effectively through times of extraordinary change.

Following such a legacy requires a certain touch, which early indications show Cook has.

“Robert’s approach to his new position can be described as thoughtful and measured,” said Jim Toes, president and CEO of the Security Traders Association. “He has demonstrated both publicly and privately a sincere respect for Rick, but also a boldness to effect change at FINRA. I think people are responding well to him.”

As Toes explained, Cook’s humble and steadfast approach started with his willingness to take meetings where he was the only FINRA representative. That enabled him to gather unfiltered input from FINRA’s members and establish professional relationships as well. Information gathered from these meetings also provided an effective heat map on issues that Cook would later seek input on from a broader consensus.

Cook has also embarked on FINRA360, a comprehensive self-evaluation and organizational improvement initiative which has included soliciting industry input through formal Request for Comment filings and Special Notices.

In March 2017, one such Notice key to the FINRA360 initiative was FINRA’s request for comment on Potential Enhancements to Certain Engagement Programs. FINRA maintains 16 Advisory Committees in addition to Ad Hoc and District Committees. Much of the historical industry input has come from these Committees and Cook is seeking guidance if they should be revamped. While Cook’s actions towards soliciting member and industry feedback has been meaningful and well-organized, industry participants say it is how he conducts himself that enables him to get the cooperation he needs now and undoubtedly will need in the future.

“Every new CEO will solicit input as part of any internal review of its operations; few however are able to get it to the degree in both quantity and quality that Robert has been able to get thus far,” Toes said.

FINRA’s request for comment on Potential Enhancements to Certain Engagement Programs has received 46 letters from the industry. That serves as a good example of the industry’s engaged response and demonstrates that those who experienced the legacy of Ketchum and now find themselves across the table from Cook are willing to help FINRA’s new CEO.

“As CEO, Robert’s extensive market knowledge, deep appreciation of investor-protection issues, and fair and balanced approach to regulation make him uniquely qualified to lead FINRA as it embraces the challenges facing the U.S. capital markets brought about by an ever-evolving market structure and technological innovations,” said Murphy & McGonigle’s Len Amoruso, a 27-year financial services industry expert. From 1989 to 1999, Amoruso was with the New York District office of FINRA as chief counsel and deputy director.

SEC’s Role

While industry participants are confident Cook will be an effective leader and take into serious consideration the input he receives, realistically that he will only be able to accomplish so much given the role the U.S. Securities and Exchange Commission has in its regulatory oversight of FINRA. Many of the changes in policies and procedures at FINRA, as well all rule changes, require SEC approval. It is to be seen how the SEC reacts to changes to the status quo and if there will be any disconnects between Cook’s vision and that of the SEC.

The financial services industry is very results-oriented and at times fails to appreciate or recognize how outcomes are accomplished. In other words, the industry does not always focus on how results are achieved, only if they were or were not. In the case of Cook, the ‘how’ has proven to matter.

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