Making it to the top of Goldman Sachs brings wealth, prestige — and apparently a waiver from Finra from taking the broker exams it regularly requires of others in the securities industry.
The Financial Industry Regulatory Authority Inc.
gave former U.S. senator and New Jersey Gov. Jon Corzine a pass from taking the Series 24 and Series 7 exams when he returned to the financial sector to head the now-bankrupt MF Global Inc. in 2010 after an 11-year break from the industry. After such a gap, Finra normally requires brokers to take these exams. The agency did require Mr. Corzine to take the Series 32 futures exam.
The fact that Mr. Corzine didn't have to requalify for registration probably didn't make a difference in the firm's recent collapse,
costing 1,066 employees their jobs. But the perception of special treatment riles some advisers.
“There should be no favoritism or cronyism within the securities industry,” Nigel Taylor, owner of Taylor & Associates, wrote in an e-mail. “It's corrupt enough at the top already, as recent enforcement actions against brokers, fee-only planners and insider traders have illustrated.”
Mr. Corzine worked on Wall Street for 24 years, capping his career by serving as co-chairman and chief executive of Goldman Sachs & Co. He left the firm in 1999 and was elected to a U.S. Senate seat from New Jersey in 2000. He was elected governor in 2005.
After he was defeated for re-election in 2009 by current New Jersey Gov. Chris Christie, Mr. Corzine joined MF Global. Finra says on its website that investment professionals must retake exams after being out of the business for more than two years.
Forbes.com was the first to report in a
blog post last week that Mr. Corzine received the Finra waivers.
One compliance consultant speculated that Mr. Corzine used his Finra connections to obtain his waivers. He had served on the board of NASD, which later became Finra.
“It can only be surmised that due to his former position on the board of governors, he was able to pull strings not available to the rest of us,” said Brian Hamburger, managing director of MarketCounsel.
A lawyer for Mr. Corzine did not return a call for comment.
Finra spokeswoman Nancy Condon denied last week that Mr. Corzine received special treatment, saying Finra grants a large number of exemptions each year. So far this year, Finra has approved 1,556 waivers, while denying 1,333 others, according to Ms. Condon. She did not supply the total number of exams administered.
The Securities and Exchange Commission, which regulates Finra, did not respond to a request for comment.
Finra is not the only regulator that grants waivers. For instance, nearly every state exempts certified financial planners from the Series 65 licensing exam and allows other exceptions, too.
STANDARD PRACTICE
“It's a pretty standard practice,” said Steven Thomas, director of Lexington Compliance and former chief compliance examiner in the South Dakota Division of Securities. “In a lot of cases, it's justified. [But] there would be no justification on why [Mr. Corzine] should get a waiver.”
Ms. Condon said that the same standard applies to everyone seeking to skip exams.
“Each request for a waiver is reviewed and considered against the detailed criteria posted on Finra.org,” Ms. Condon wrote in an e-mail. “It includes general experience, education and regulatory or legal experience.”
Before his sojourn into politics, Mr. Corzine spent his career in the financial industry. After working at a regional bank in Ohio, he joined Goldman Sachs in 1975 as a bond trader. He worked his way up to co-chairman and chief executive in 1994, serving until 1999.
During his time in government, Mr. Corzine was not completely separated from financial industry matters.
“On the [Senate] Banking Committee, he worked on what became the Sarbanes-Oxley Act of 2003,” states a biographical sketch in the Almanac of American Politics.
As governor, of course, he had ultimate responsibility for New Jersey's Bureau of Securities.
But Mr. Thomas argues that Mr. Corzine's government service didn't expose him to the rapidly changing environment of financial regulations.
David Tittsworth, executive director of the Investment Adviser Association, said that Mr. Corzine probably would have passed his exams if he had been required to take them. Those credentials, however, don't guarantee ethical behavior.
“As far as I know, Bernie Madoff passed the Series 7 examination,” Mr. Tittsworth wrote in an e-mail. “He was chairman of Nasdaq, and his family held various roles at Finra/NASD. None of those factors stopped him from perpetrating fraud. Instead, all of those factors lent credibility to his resume.”
Observers agree that Mr. Corzine's exam waivers probably had no effect on MF Global's collapse, which was caused by vast overleverage in European sovereign debt.
On Friday, a court-appointed bankruptcy trustee announced that MF Global is not conducting any business and will not be reorganized. Of the 1,066 employees fired, between 150 and 200 of them would be rehired to help wind down the business.
About 17,000 customer account positions and approximately $1.5 billion in customer account funds have been transferred to other future commodities merchants.
Email Mark Schoeff Jr. at mschoeff@investmentnews.com
