September 25, 2012 / 8:00 PM / 7 years ago

FINRA to ramp up scrutiny of costs and benefits of rules -lawyer

Sept 25 (Reuters) - The Financial Industry Regulatory Authority will more deeply scrutinize the potential costs and benefits of securities industry rules it wants to propose, a top lawyer for the Wall Street industry-funded watchdog said on Tuesday.

FINRA will take the added measures before submitting proposed rules to the U.S. Securities and Exchange Commission for approval, said Robert Colby, FINRA’s chief legal officer.

The move comes, in part, as the SEC wants FINRA to “better support” the economic aspects of proposals the SEC must review, Colby said in remarks to compliance professionals at an industry luncheon in New York. The SEC must review and approve rules proposed by securities industry self-regulatory organizations.

An SEC spokesman declined to comment.

The SEC became more concerned about costs and benefits of industry rules when a federal court threw out an important part of the Dodd-Frank financial oversight law involving shareholders’ ability to nominate corporate directors, saying the agency’s economic analysis was flawed.

Now those concerns appear to be trickling down to rules from self-regulatory groups which the SEC must review and approve.

Wall Street’s top lobbying group, the Securities Industry and Financial Markets Association, has also been pushing for more detailed analyses of the costs of certain rules to the industry.

FINRA’s heightened focus will probably require the regulator to hire more economics professionals, Colby said during what he described as his first public comments since joining FINRA in June.

While the shift is a positive development, it will also mean a more “rigorous process” for developing or changing industry rules, Colby said.

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