ORLANDO – The Financial Industry Regulatory Authority (FINRA) plays an important in helping keeping the public’s investments safe, and law professor Benjamin Edwards wants to make sure the organization is keeping up its end of the bargain.
FINRA is an independent, nonprofit organization that is responsible for protecting the United States’ investors by ensuring the securities industry operates fairly and honestly. Edwards, who teaches law at the Barry University Dwayne O. Andreas School of Law in Orlando recently published a draft law review article called “The Dark Side of Self-Regulation” and will be published in the University of Cincinnati Law Review.
The article examines FINRA’s public representatives serving on the organization’s board of governors and proposes an alternate appointment process for said representatives. One of the main reason Edwards proposes taking another look at some of the public representatives is because some of them also serve on the boards of corporate financial intermediaries, which could lead to conflicts of interest.
“The United States faces a looming retirement crisis,” Edwards told the Florida Record when asked about his inspiration for writing the article. “FINRA plays a vital role in setting the degree of protection for savers. I want it to be as effective as possible. That draft also builds on prior work I’ve done.”
Edwards’ proposals aren’t meant to overhaul FINRA. Instead, his proposed reforms are incremental and do not alter the current structure of FINRA’s Board of Governors. Instead, along with a different appointment process, Edwards is proposing increased transparency and more careful oversight from the Securities & Exchange Commission (SEC). In fact, the concern regarding the appointment process for public representatives isn’t a new one. It was initially raised by Massachusetts at FINRA’s creation, according to Edwards.
“In my draft, I also stressed that the proposed incremental reforms should not be viewed as silver bullets,” Edwards said. “My position is that FINRA would be a better and more effective organization with the reforms than without.”
The reaction to Edwards' paper has been generally positive he says. Edwards presented the draft at South Eastern Association of Law Schools and received insightful and generally positive comments. It’s also been circulated to law professors around the country and Edwards was able to improve upon it based on the feedback he received. The Oxford Business Law Blog also contacted Edwards with a request for a post on the piece.
As far as what Edwards’ goal is for all of this, it’s simple—to see a more effective and efficient FINRA.
“I think if even one of the proposals is adopted by Congress, the SEC or FINRA, it may generate improvements greater than the trade-offs involved,” Edwards said.
While Edwards’ article takes a critical look of FINRA, he also recognizes that there are a lot of good people who work there, too.
“I have a tremendous amount of respect for the job they do,” Edwards says. “FINRA’s board and officials also face a tough task and endure pointed criticisms from all sides. While my draft focuses on the dark side of self-regulation, I hope that highlighting dangers we can avoid them. Ultimately, society benefits when FINRA strikes the right balance between the public interest and industry concerns."