[ by Melanie Gretchen ]

FINRA was served with a whistleblower lawsuit filed by a former FINRA examiner, who claims he was fired for detecting a flaw in the system that allowed large broker-dealers to be over-leveraged.  Joseph Sciddurlo, 58, was a principal examiner for FINRA in 2010 when he found that the regulator’s system allowed large firms to circumvent a SEC rule limiting leverage to 15 times net capital. 

According to his complaint, filed in U.S. District Court in lower Manhattan, although Mr. Sciddurlo initially was praised and asked to follow up with "a better risk-rating methodology with respect to broker-dealers," he eventually he was downgraded, placed on probation and fired in May 2011, without a legitimate reason.

Mr. Sciddurlo claims that FINRA illegally discriminated against him on the basis of age and fired him for threatening to disclose the risk-rating flaw to other regulators and to the public. 

He seeks at least $25 million in damages.

The case is:   Sciddurlo v. Financial Industry Regulatory Authority, 13-cv-02272, U.S. District Court, Southern District of New York (Manhattan).

[NY Post, 4/5/13] and [On Wall Street, 4/5/13]

To contact Melanie Gretchen: melanie@compliance-insights.com.