The Office of the Ombudsman for the Financial Industry Regulatory Authority (FINRA) recently issued its 2014 Report regarding its activities. The primary mission of the Ombudsman’s Office is to provide assistance to investors, brokerage firms, individual brokers, and any other business or individual who interacts with FINRA and has concerns regarding unfair treatment or inconsistent regulatory practices. As an independent, neutral and confidential source of assistance, the Ombudsman’s Office addresses concerns and complaints, whether anonymous or not, concerning operations, enforcement, or other activities of FINRA or any of its subsidiaries and employees.
The Ombudsman is not meant to replace the mechanisms that FINRA already has in place to respond to the issues raised by its constituents, but supports them by helping constituents to identify and evaluate options, explaining the appropriate process for resolution, and when possible, referring concerns to the appropriate office or department and monitoring the outcome. The Ombudsman also will informally facilitate the resolution of or escalate issues that fall outside of FINRA’s established policies or processes.
During 2014, the office received a total of 575 cases, compared to 567 cases received the previous year. FINRA-related concerns represented 239 (or 42 percent) of total cases received; and the vast majority were related to registration and disclosure policies, especially those that impacted the manner and content of the information disclosed on BrokerCheck®, and the outcome of examinations and investigations conducted by FINRA’s regulatory operations staff.
The office also received 110 complaints regarding the activities of firms, brokers, and other miscellaneous individuals and entities, as well as 220 inquiries regarding a wide range of topics including registration and disclosure policies, FINRA’s Investor Complaint Program, the disciplinary process, sales practice examination policies and the arbitration process. Brokers and investors were the most frequent visitors to the office, accounting for 44 percent and 25 percent of total cases, respectively.
In 2014, 220 (38 percent) of the total cases the office received consisted of inquiries about various FINRA rules, policies or procedures, as well as other federal or industry regulations. FINRA-related complaints comprised 42 percent (239) of total cases, which represents a 17 percent increase when compared to 2013. A case is categorized as a FINRA complaint if a constituent raises concerns regarding FINRA policies, procedures, rules or regulations; FINRA staff; any regulatory process such as examinations, investigations, enforcement or disciplinary activity; and the arbitration and mediation processes.
All other complaints and regulatory tips regarding suspicious or questionable activity accounted for 110 cases (19 percent) in 2014. These complaints are referred to FINRA’s Investor Complaint Program or Office of the Whistleblower for further review. All cases involving FINRA complaints are designated to a department based on function or area of responsibility. For example, complaints related to Member Regulation, Market Regulation and the Office of Fraud Detection frequently involve sales practice examination, investigative and review processes. Enforcement complaints may pertain to investigative techniques or sanctioning decisions. Finance matters may relate to issues involving the processing of fees or the issuance of refunds.
The Ombudsman responded to constituents by reviewing the cases presented; researching and providing clarification of applicable procedures, rules and regulations; and referring the constituent to appropriate resources and offices within FINRA. The Ombudsman’s review also included facilitating discussions with staff, conducting shuttle diplomacy between the constituent and the business unit, and when necessary, reviewing regulatory documents such as examination reports, investigative files and on-the-record testimony. The Ombudsman listened to arbitration tapes, reviewed arbitration files, interviewed staff, consulted subject-matter experts, and escalated matters to senior management, as appropriate.
During 2014, the Ombudsman periodically met with FINRA’s Chief Executive Officer and the Audit Committee of FINRA’s Board of Governors to share statistics and trends regarding the cases received by the Ombudsman’s Office. The Office also met with department managers to review statistics and trends specific to their area of responsibility and discuss options to address questions and issues raised frequently.