By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | October 8, 2009 | Investor Information

We know FINRA (Financial Industry Regulatory Authority) is supposed to protect investors from bad financial advisors, bad financial service companies, and bad investment products. We know they have not been very effective based on their inability to detect the Madoff Securities scam and the alleged Stanford Financial Group fraud before thousands of investors lost billions of dollars.

We also know FINRA is an SRO (Self Regulatory Agency) that is dominated by the big Wall Street firms. Lastly, we know Wall Street does not want too much scrutiny or too many regulations because they reduce profits. Therefore, no matter what FINRA says, it is going to have limited effectiveness, because that’s what the industry wants.

In an example of extraordinary ineptitude, over a period of years, the NASD (FINRA’s predecessor)  received five credible warnings that Sanford Financial Group CD’s were a scam. You could see how they might ignore warnings from know-nothing investors, but one of the five warnings came from the SEC’s Ft. Worth office and they ignored that one too.

If that incompetence is not bad enough, now FINRA is insulting our intelligence. An internal report showed Bernie Madoff’s broker/dealer records did not disclose he owned an investment advisory business and they did not have access to the system that provided this information.

Who are they kidding? All they had to do was use the Internet to go to the SEC’s site and view the ADV filed by Madoff’s investment firm. If investors’ had Internet access to the document, why wouldn’t FINRA? They did, but it is more convenient to use spin to blame the system than themselves.

We may never know the real reasons why FINRA and the SEC did not uncover the Madoff scam before he turned himself in. So far, we are being given some pretty dumb spin to control damage to their respective organizations. They should be ashamed of themselves. So should Wall Street and the politicians who control them!