The retail investor community is calling FINRA corrupt after numerous scandals have surfaced.
FINRA has received more backlash after freezing the trading of MMTLP (Meta Materials) prior to its spinoff.
But that’s not all.
During an interview with SEC Chairman Gary Gensler, he tells ‘We The Investors‘ that he believes the SEC should have the ‘Best Execution Rule‘, not the self-regulatory organization, FINRA.
More on that below.
Here’s the latest happening in the retail community.
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Who and What is FINRA?
FINRA stands for the Financial Industry Regulatory Authority and is a self-regulatory government organization that oversees U.S. broker-dealers.
The organization contains records of every trade made available intraday, including that of naked short sales.
FINRA requires firms to be able to meet their short sale requirements as well as have a process to close out fails to deliver within their required timeframes.
However, they’re the open window that allows these manipulative strategies to occur in the market.
FTDS (fails-to-deliver) are mounting up every month according to SEC data, and FINRA is unable to get firms to close out these obligations.
The retail community is calling it foul play, alleging the possibility of lobbying within the self-regulated organization.
FINRA’s justification towards FTDs say that firms face challenges related to miscalculations.
FINRA is also responsible for where retails orders are being executed, per the ‘Best Execution Rule‘.
Chairman Gensler says this is too important for it to not be handled directly by he and his team.
Let’d dive right into it.
What is the ‘Best Execution Rule’?
FINRA is responsible for outsourcing ‘best execution’ with the best execution rule, according to SEC Chairman Gary Gensler.
This means the self-regulatory organization has the power to execute orders in off-exchange and dark markets for ‘best execution’ and ‘price discovery’.
But Gary Gensler says that this rule is too important for it to not be in the SEC’s court.
The Chairman told ‘We The Investors’ that he does not agree that sending 60%-80% of certain stock to the dark markets is the best way for FINRA to act on price discovery or that he would consider to be ‘best execution’.
He says that to establish price in a lit marketplace, a competitive marketplace, that brings more buyers and more sellers to the marketplace will tend to have more support.
But retail investors remain critical of the Chairman despite his direct communication with the retail community in December.
Is FINRA corrupt?
I’d love to hear your thoughts in the comment section down below.