Now that the economic recovery is well underway, there are renewed concerns that the financial sector is back to engaging in some of the same problematic activities that played a role in sparking the Great Recession. For one thing, sub-prime mortgage loans are back, and “too big to fail” banks remain huge.
One organization that’s supposed to be keeping an eye on financiers is the Financial Industry Regulatory Authority, or FINRA—an independent nonprofit that was established in the merger of National Association of Securities Dealers and the regulatory arm of the New York Stock Exchange in 2007. But some have doubts that FINRA is doing its job.
At a senate hearing on Thursday, Senator Elizabeth Warren grilled FINRA’s chairman, Richard Ketchum, about how his agency deals with misconduct among advisors—in other words, when financial advisors violates investment rules or commits fraud. While the hearing was called to discuss regulatory reforms and whether American stock markets have become too complex, Warren took the opportunity to question whether the financial industry was being properly regulated. “As the head of FINRA,” Warren asked Ketchum, “what are you going to do to make sure that the elderly and the people who can least afford bad financial advice don’t fall into the net of someone who’s already got a documented history of misconduct?”