Is FINRA Charles Schwab’s concubine?

Have you ever had a problem with a huge company that tries to “make you go away” by stonewalling and ignoring you? That’s what Charles Schwab has been trying to do since it sold me auction rate securities in 2008 on the day before markets froze. They had to have known when they took the order that these things weren’t liquid and safe, the two reasons they sold them to me in the first place. They were happy to take the order then…but today they, alone among retail brokers, have refused to make good on the ARSs they sold to conservative investors like me.

I have been using this blog (see my previous posts) and the interest of reporters to make my displeasure public.

Beth Healy of the Boston Globe missed the irony of Massachusetts residents lending the state money for the Big Dig and not being able to get it back by pointing out that the state “saved” money by not calling the notes.  Healy asserts, “…regulators say they’ve done all they can to help.”

Uh, no, not quite. I’ve never received a single response to repeated inquires to the governor, the secretary of state, the attorney general, my local representative and, above all, the source of these ARSs, the treasurer’s office. Why the silence? Simple: it would be too embarrassing for the politically ambitious Treasurer Cahill to force Schwab to settle. And no state department is going to make another department look bad. AG Coakley can get headlines for pursing fraud from just about any company. Why expose the shady dealings the state itself engages in?

Still, Schwab hated that Globe story enough to send me a letter terminating my accounts. No problem, guys, I was happy to leave.

So, you might think, why not complain to the SEC and to Wall Street’s “self-regulator,” the Financial Industry Regulatory Agency (FINRA)? I have, of course. In 2008 I filed complaints with both agencies. How’d that work out?

Just as you might expect. We all know how well the SEC has done at protecting people from Madoff, Stanford and CDOs. With so many larger fish to pry off the hook, paying no attention at all to individual investors stuck in ARSs is a natch.

And FINRA, known as Wall Street’s favorite regulator, actually contributed its former boss, Mary Schapiro, to the helm of the SEC. Miraculously, after years of doing nothing to protect the little guy at FINRA, Ms. Schapiro apparently grew a pair just in time for her confirmation hearings. Just saying you are for strong consumer protection is, I guess, enough to assure congressional committees you should run an agency we now know was dysfunctional.

Still, FINRA — like Schwab — is listening to the political discourse and is maybe (finally) rubbed a little raw by the attention their abject failures have generated. When Jed Horowitz of Investment News wrote about the lack of action in New York’s suit against Schwab, something must have clicked at FINRA headquarters.

A week or so after Horowitz’s article, I got a call from FINRA. I assume the timing wasn’t accidental. They probably hoped to convince me to shut up, at least for another year or two until they find a way to exonerate Schwab or the whole thing blows over.

They wanted me to know they were “actively engaged” and they’d “made progress.” They couldn’t say what, if anything, they actually plan to do. Or when, if ever, they plan to do whatever they decide they are going to do.

While Congress debates partially re-regulating Wall Street, the simple fact is that the entire industry is morally bankrupt and the interests of the country have been repeatedly subjugated to the greed of the industry. Worse, regulators, such as they are, are victims of “regulatory capture.” Even if FINRA wasn’t designed as Schwab’s concubine, it has willingly become one. Schwab asks, FINRA dances.



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2 responses to “Is FINRA Charles Schwab’s concubine?”

  1. […] the Securities and Exchange Commission, FINRA and the other lap-dogs of Wall Street miscreants like Schwab have let the company off the hook, the […]

  2. […] BTW, FINRA, where are YOU in all this? Still “investigating? If you enjoyed this article, please […]

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