FINRA Creates Office of the Whistleblower

The Financial Industry Regulatory Authority (FINRA) said it learned from recent scandals and aims to make its process for whistleblower tips more efficient.

The agency announced that it has established a new Office of the Whistleblower to expedite the review of high-risk tips by FINRA senior staff and ensure a rapid response for tips believed to have merit, according to a press release. The new office will be overseen by FINRA Senior Vice President Cameron Funkhouser.

“One of the important lessons learned from the recent scandals is the need for regulators to recognize and react to regulatory intelligence offered by whistleblowers,” said FINRA Interim CEO Stephen Luparello, who will soon be replaced by CEO Richard G. Ketchum (see “FINRA Names Ketchum as CEO). “We want to encourage individuals with evidence of, or material information about, potentially illegal or unethical activity to come forward.’

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Luparello said the new initiative will ensure that individuals with significant information will reach senior staff, who can quickly assess the level of risk involved and make sure that each tip is properly evaluated. Tips warranting additional review and investigation will be subject to an expedited regulatory response, he said.

FINRA’s Office of the Whistleblower established a toll free phone number (1.866.96.FINRA) and Web page (www.finra.org/whistleblower) where individuals can send tips. FINRA said whistleblower tips that fall outside FINRA’s jurisdictional reach will be referred to the appropriate regulatory or law enforcement agencies.

FINRA also said that the whistleblower initiative will not replace its regular handling of thousands of routine regulatory tips and customer complaints.

FINRA Unveils Tools to Spot Scams

The Financial Industry Regulatory Authority (FINRA) released two online tools designed to help investors spot and resist investment fraud, the agency said.

The online tools—a Scam Meter and a Risk Meter—will help investors evaluate the investments they’re being offered and determine whether their own personality characteristics make them more vulnerable to investment fraud, according to a press release from FINRA. The Scam Meter asks the user a series of questions about the investment he is considering to determine whether that investment might be too good to be true; and the Risk Meter asks 12 questions about the user’s behavioral traits to determine if he shares characteristics that have been shown to make some investors vulnerable to investment fraud.

FINRA also said it released an Investor Alert, Avoiding Investment Scams, which explains the characteristics of the most commonly used securities frauds, including Ponzi and pyramid schemes, pump-and-dumps, and offshore scams. The Alert provides links to online tools investors can use to check the background of investment professionals, investigate investments they are considering, and file a complaint if a problem occurs.

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The Alert outlines a series of red flag warnings that investors should be suspicious of. The red flags include funds that:

  • offer guarantees that the investment will perform in a certain way;
  • are not registered, including unregistered stocks, bonds, and hedge funds;
  • deliver overly consistent returns, regardless of market conditions;
  • credit complex investing techniques for their unusual success.


 

More information is available at www.finra.org.

 

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