A candidate for the Financial Industry Regulatory Authority Inc.'s board of governors has launched what he calls a “dissident campaign,” asserting he will try to prevent the regulator from “antagonizing” members, especially independent broker-dealers.
Brian Kovack, president and co-founder of Kovack Securities Inc., obtained enough signatures on a petition to launch a campaign for the board seat allotted to a midsize firm. He will run against John Muschalek, vice chairman of First Southwest Co., who was selected by the Finra nominating committee.
“I would like to actively challenge Finra in certain areas,” Mr. Kovack said. “I'd like to see some reform and make the organization more effective without unnecessarily antagonizing member firms who are trying to do the right thing for their clients.”
The
election will take place at the July 30 Finra board meeting in Washington. Other seats up for election include one for small firms and one for large firms.
If elected, one of Mr. Kovack's targets would be Finra's arbitration system.
“It needs a better structure of accountability for lawyers who file frivolous claims,” he said.
He also wants to refine the amount of disclosure that registered representatives must make on documents that form the foundation for
the BrokerCheck database. He said that reporting requirements on liens and other legal settlements go too far.
“There needs to be a de minimus exemption,” Mr. Kovack said.
Other areas of concern for Mr. Kovack are Finra's examination process, potential cybersecurity regulations, a pending
automatic data collection system known as CARDS and the
harmonization of broker and investment-adviser regulations.
“Fundamental change can be made, but it has to start from the top, from the board,” Mr. Kovack said.
Mr. Muschalek was not available for comment. Finra officials declined to comment.
Mr. Kovack has received the endorsement of the Financial Services Institute, a trade group which primarily represents independent broker-dealers.
“Having an owner of an independent firm on the Finra board is critical for our industry,” Dale Brown, FSI president and chief executive, said in a statement. “Brian will bring the invaluable experience of running a family-owned firm and a track record of service and leadership in the industry to the Finra board.”
The small-firm race is between Stephen Kohn, president and chief executive of an eponymous brokerage, and Joe Romano, president of Romano Wealth Management. Both Mr. Kohn and Mr. Romano were nominated by petition. Finra did not nominate a candidate for the small-firm seat.
John Thiel, head of Merrill Lynch Wealth Management, is running for the large-firm seat unopposed after being nominated by Finra.
A small firm employs between one and 150 registered representatives, a mid-size firm between 151 and 499 and a large firm more than 500.
Board members serve three year terms on the panel, which governs the industry-funded broker-dealer regulator. The majority of seats on the 24-member board are held by so-called public members who do not work in financial services. The other board members are from the industry.
Earlier this week, Finra released its
annual report for 2014. The organization's profit soared, thanks to increased revenue and lower personnel costs.
Finra regulates 4,100 brokerage firms, 161,600 branch offices and about 636,700 brokers.
