What possessed Dealbook to write this story?  For what purpose?  Hopefully, the damage can be contained - I mean, the last thing we need to have are FINRA officials and staffers walking around with dreams of becoming 'regulatory rock stars'.  Well, it ain't going to happen;  nor should it.  NYTimes reporter Ben Protess makes the claim that with each high profile insider trading arrest, it's the Securities and Exchange Commission, the face of U.S. securities regulation, that gets the credit and kudos for the bust and for its outsized monetary sanctions.  Yes, in many cases, it's FINRA or another SRO that makes the discovery and brings in the SEC for deal closing and photo ops.

[C-I Note: Of course, these highly-publicized cases and outsized sanctions can turn against America's top financial regulators. The SEC was brow-beaten over its proposed $285mn settlement with Citi.  The CFTC has similarly been on the firing line: where was it when MF Global collapsed, and what had it been doing prior to that time?  And why it was unable to prevent MF Global from over-investing, not only its own money, but the funds of its customers (which should have been safely segregated) - a collapse that took down all of its employees and as much as a billion dollars in customer funds.]

Who at FINRA is Bothered by Working in the SEC's Shadows? Perhaps FINRA's Chairman and CEO Rick Ketchum?  Beyond the issue of having his organization designated as the regulator for federally-registered investment advisers, that would not seem likely.  After all, Mr. Ketchum and his executive team maintain rather low profiles.  Mr. Ketchum has been credited with just 2 public speeches (and he testified once) over the past 5 months.  What's he's done about communicating with FINRA's membership - America's broker-dealer community, or the constituents - the investing public - that is working so hard to protect? Compare that to the endless number of public appearances by Mary Schapiro and her SEC Commissioners.  The same can be said for the low-key exposure of commodity regulator, the NFA (National Futures Association), especially when compared to CFTC Chairman Gary Gensler and his Commissioners - including outspoken Commissioner Bart Chilton. What FINRA Does Right and What It Needs to Improve Upon. Simply stated, FINRA should master the basics before they worry about getting involved with matters that can bring the organization face time with the media. Plagued with notoriously high turnover - although that might have slowed down during the current downturn in hiring - FINRA will always be hard-pressed to fully see the benefits of its training.  As soon as someone "learns the ropes," he or she grabs a job with a broker-dealer or adviser.  That's the way it is, and possible answers lie elsewhere - like in HR, where committed terms of service can be arranged, or different compensation and working arrangements can be more accommodating. What we're saying is that FINRA cannot and should not slow down its efforts to put out the best examiners it can - even if it's "money out the door."  That means continuing to marshall much of its resources on training examiners and other staff - including ways to better communicate with broker-dealer personnel - their "clients." The staff can benefit from exposure to the practical aspects of broker-dealers' business areas.  Back when David Leibowitz ran District 10, he got compliance experts to lead training sessions and discussion at his NASD offices.  He arranged for his personnel to sit alongside market-makers and agency traders to observe what they did and why.  During those visits they didn't test a single transaction.  Yet, they probably got a better idea as to whether the people they were observing were truly sincere "about doing the right thing." Similar observations can be done in most other profit or business centers - sales offices, branches, research.  In many cases, they can accompany supervisors in these areas as the conduct reviews.  They also can accompany or observe compliance personnel as they complete their daily surveillance tasks. Understanding Practical Aspects of Securities Business. The key is to better understand the practical aspects of why people do what they do.  Learn to differentiate when a firm or its personnel truly has respect for the rules or regulations.  To distinguish human or unintentional errors intentional ones.  Learn to understand the circumstances that lead generally compliant firms and personnel to take short cuts and what effect that may have on the firm's ability to comply. Conclusion. Okay, now you have it - from a long-time compliance and internal audit manager, and independent consultant, who preferred to identify as many areas of errors and deficiencies that one can practicably do within a limited timeframe.  Judgment, evaluating what sort of fines or sanctions might be appropriate is an process unrelated to the first.  And that, is yet another area for FINRA personnel to better understand.  Use findings to teach best practices, and recognize when a fine or sanction is truly appropriate. Carry a big stick, but use it judiciously. And let the SEC and others seek the adoration of the public.  FINRA and its personnel have bigger fish to fry - so to speak. You're welcome to read the complete story written by Mr. Protess, by going to:   [Dealbook, 12/1/11]    But take our word for it  - what you just read  IS THE REAL STORY.