Financial Advisor IQ (November 17, 2017) - The Public Investors Arbitration Bar Association claims that almost half of the public governors on Finra’s board tasked with protecting investors’ interests have major conflicts of interest. In response, Finra says is considering the claims.

Six of the 13 public governors are either employed at or sit on the boards of financial powerhouses, according to a report prepared by PIABA president Andrew Stoltmann, who’s an attorney at Stoltmann Law Offices, and Benjamin Edwards, associate professor of law at the University of Nevada, Las Vegas William S. Boyd School of Law.

Among the public governors picked out by PIABA are Eileen Murray, co-CEO of the hedge fund Bridgewater Associates, who’s been a public governor since last year; Shelly Lazarus, a public governor since 2013 who serves on the board of asset management behemoth the Blackstone Group and is also chairman emerita of ad agency Ogilvy, where she worked as an exec from 1995 to 2012 and which worked on Finra’s BrokerCheck ad campaign; Carol Anthony Davidson, a public governor since 2013 who joined the board of asset management firm Legg Mason in 2014; Joshua Levine, cofounder and managing director of Kita Capital Management; and William Heyman, the current Finra chairman who’s also chief investment officer at insurance firm Travelers Companies, according to the report.

PIABA also says certain inconsistencies in Finra’s disclosures about its public governors, such as claiming Levine as “retired” in its annual reports even though his own Finra profile lists him as working without interruption since 2005, suggest poor quality of disclosure and governance.

“After reviewing the current group of public governors, our primary concern is that an organization dedicated to investor protection should have more persons that have spent time as investor advocates on its governing board,” Edwards says in a statement.“Finra should also more closely police conflicts of interest on its governing board.”

PIABA’s list of alternatives for the public governor posts include the Department of Labor’s fiduciary rule architect Phyllis Borzi, an attorney recognized for representing investors, a former assistant director of enforcement at the SEC and a law school professor recognized for her expertise in securities dispute resolution.

A Finra spokeswoman tells FA-IQ that it’s considering PIABA’s report along with all other comments it received following the March request for comment on its programs, including transparency in board governance.

“Each governor, regardless of his or her affiliation or classification, is responsible for serving in an unbiased and objective manner, and voting on matters for the good of the investors, industry and marketplace,” the spokeswoman says in a email. “Board members need to have an understanding of the issues facing Finra and an ability to apply their knowledge and expertise to those issues. Public governors apply their varied expertise in representing the interests of the investing public and sound financial markets.”