The U.S. Securities and Exchange Commission can do a better job of overseeing the Financial Industry Regulatory Authority, a government report found.
While the SEC routinely inspects many regulatory programs run by Wall Street’s industry-funded regulator FINRA, it doesn’t review whether FINRA’s rules for the securities industry are effective, according to a Government Accountability Office report released late Wednesday. It also doesn’t have a process for such a review, said GAO, an investigative arm of Congress.
Congress required the GAO’s study in the Dodd Frank financial reform law of 2010. It specifically directed the GAO to review oversight of various FINRA practices, including executive compensation practices, securities arbitration programs and governance issues.
While a federal law authorizes FINRA to regulate the brokerage industry, the SEC must oversee FINRA and approve its industry rules.