Exclusive: FINRA’s top lobbying executive departing

June 29, 2012
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(Reuters) – The top public relations and lobbying executive for Wall Street’s industry-funded regulator is leaving, FINRA confirmed on Friday.

Howard Schloss, the Financial Industry Regulatory Authority‘s head of corporate communications and government relations, will end his 12-year run with the regulator in September.

Schloss is among FINRA’s highest paid executives – his total compensation topped $1 million in 2010, according to FINRA’s most recent annual report. His compensation has raised questions among many Washington insiders.

His departure coincides with a review by the U.S. Securities and Exchange Commission of executive compensation practices and other issues at FINRA, according to a report by the Government Accountability Office (GAO) on May 30.

The SEC, which oversees FINRA, has not historically reviewed the regulator’s executive compensation programs, according to the GAO, an investigative arm of Congress.

Schloss is also leaving just as U.S. lawmakers are considering legislation that would establish a self-regulatory organization for registered investment advisers.

FINRA has been lobbying heavily for the role. Schloss, as head of government relations, has been overseeing those efforts.

Some industry watchers were confused by his departure given the effectiveness in FINRA’s, and by extension Schloss’s, lobbying strategy that may have helped form the legislation that could change how investment advisers are regulated.

One Washington insider, who did not wish to be named, said FINRA’s plans for replacing Schloss and other highly-paid employees could help the regulator cut expenses.

FINRA, in April, announced it suffered a “significant loss” last year that would require an increase in certain fees it charges to brokerages.

Schloss gave no indication on why he was leaving.

“I felt it was time for me to make a change sometime in 2012,” Schloss said in a statement. FINRA’s chief, Richard Ketchum said in a statement e-mailed to Reuters that he asked Schloss to stay until the end of the summer.

FINRA has spent about $4 million on lobbying since 2008, in addition to Schloss’s compensation, when the U.S. financial crisis erupted, according to federal disclosure reports.

Much of that amount has been spent on efforts to broaden FINRA’s authority – namely through it becoming a self-regulatory organization for the roughly 12,000 investment advisers registered with the SEC.

Congress would need to pass legislation granting that authority to FINRA, which presently oversees 4,400 brokerage firms and nearly 630,000 brokers, according to its website.

The SEC does not have the staff or financial resources to regularly examine its registered advisers, according to a 2011 report by the agency’s staff. It examines them about once every 11 years. The problem has prompted agency officials and lawmakers to consider alternatives, such as a self-regulatory organization or a fee that advisers would pay for their examinations.

Last year, FINRA hired a powerful lobbyist, former House Financial Services Committee Chairman Michael Oxley, to help promote its cause on Capitol Hill. Other big players who lobby on FINRA’s behalf include the Podesta Group.

Two House lawmakers introduced legislation in April that would establish a self-regulatory organization for investment advisers.

Schloss is among several recent high profile departures from Wall Street’s self-regulatory body.

In May, FINRA announced it hired a former a high-ranking SEC official, Robert Colby, to replace two of its top legal advisers. FINRA’s general counsel, T. Grant Callery, retired, while Marc Menchel, FINRA’s general counsel for regulation and executive vice president said he wanted to pursue other positions.

FINRA’s chief information officer, Samuel Gaer, left in May. He is now chief executive of Liquid Holdings Group, LLC a New York-based brokerage and financial services company, according to his LinkedIn profile. Gaer could not be immediately reached for comment.

(Reporting By Suzanne Barlyn; Additional reporting by Sarah N. Lynch; Editing by Jennifer Merritt and Andrew Hay)

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