This post first appeared on the Securities Arbitration Alert blog. The blog’s editor-in-chief is George H. Friedman, Chairman of the Board of Directors for Arbitartion Resolution Services, Inc.
The Heritage Foundation’s “Project 2025” report recommends that FINRA be abolished and merged into the SEC. Failing that, the conservative thinktank urges major changes to the Authority’s arbitration program.
The 900+ page Mandate for Leadership: The Conservative Promise:
“is a collective effort of hundreds of volunteers who have banded together in the spirit of advancing positive change for America. Our work is by no means the comprehensive compendium of conservative policies, nor is our group the exclusive cadre of conservative thinkers. The ideas expressed in this volume are not necessarily shared by all…. This volume—The Conservative Promise—is the opening salvo of the 2025 Presidential Transition Project, launched by The Heritage Foundation and our many partners in April 2022. Its 30 chapters lay out hundreds of clear and concrete policy recommendations for White House offices, Cabinet departments, Congress, and agencies, commissions, and boards.”
Although the massive document touches on several agencies and concepts, two got our immediate attention.
Abolish FINRA
The first show-stopper for us is:
“With regulatory authority delegated by the government, both the Public Company Accounting Oversight Board (PCAOB) and FINRA have proved to be ineffective, costly, opaque, and largely impervious to reform. To reduce costs and improve transparency, due process, congressional oversight, and responsiveness, PCAOB and FINRA should be abolished, and their regulatory functions should be merged into the SEC.”
If FINRA is not abolished outright: “[i]n the absence of merging FINRA into the SEC as recommended, require that:
- FINRA’s Board of Governors meetings be open to the public unless the board votes to meet in executive session.
- FINRA’s Board of Governors’ agenda be made available to the public in advance.
- Board minutes describing actions taken be published without delay.
- FINRA make available to the public in advance rulemakings that the FINRA board is expected to consider.”
(ed: We point out that items 2-4 are already the case.)
Change Arbitration Program
The report also addresses arbitration program changes the Foundation wants to see, absent FINRA’s abolition (listed verbatim):
- FINRA arbitration and disciplinary hearings should be open to the public and reported.
- Require FINRA arbitrators to make findings of fact based on the evidentiary record and demonstrate how those facts led to the award given (except with respect to very small claims). These written FINRA arbitration decisions should be subject to SEC review and limited judicial review.
- Require each SRO to submit an annual report to Congress with detailed, specified information about its budget and fees; its enforcement activities (including sanctions and fines imposed by type of violation and type of firm or individual); its dispute resolution activities; and its rulemaking activities (emphasis added).
(ed: *Interesting to see the Foundation’s views on some arbitration issues align with those of PIABA and NASAA. **Of course, implementation would require that the GOP win the presidency and control of Congress.)
