By Zachary A. Goldfarb
Washington Post Staff Writer
Wednesday, February 25, 2009
The Financial Industry Regulatory Authority yesterday named longtime regulator Richard Ketchum as its new chief executive, replacing Mary Schapiro, who became chairman of the Securities and Exchange Commission.
Ketchum, currently FINRA's chairman and the top regulator at the New York Stock Exchange, takes over the private agency that oversees vast swaths of the financial market. FINRA regulates 4,900 broker-dealers and other investment firms and 663,000 registered representatives.
Like the SEC, FINRA has faced questions about its oversight of businesses run by Bernard L. Madoff and R. Allen Stanford, the two financiers who have been accused of running unconnected, multi-billion dollar investment frauds. FINRA had examined and penalized both firms in the years leading up to when the alleged frauds were revealed. FINRA has said the frauds occurred outside its regulatory purview.
Ketchum said it is crucial for FINRA, working with other regulators and elected officials, to close gaps in the regulatory system that allow for certain types of products and services to go unexamined.
"One of the problems we have in the United States is that different products can be sold to the same consumer that have different regulators or fall between different regulators," he said yesterday. These include, for instance, certain types of annuities, he said.
Ketchum said FINRA may have to play a bigger role in examining investment advisers, who are often unaffiliated with big brokerage houses and must abide by only a few rules. "The SEC doesn't have the examination resources to be regularly overseeing the wide variety of investment adviser activities that happens in this country," he said.
Ketchum has worked closely with Schapiro for many years. He spent 14 years at the SEC and also was a top lawyer for Citigroup.