It's Time for Your Finra Hearing. Do You Know Who Your Arbitrator Is?

Who gets to judge? 

The question is critical whenever a tribunal is given wide latitude to make decisions affecting life, liberty or property. But in the case of Financial Industry Regulatory Authority arbitrations -- where the adjudicators have almost unassailable power -- quality control of the judging pool can go wanting. Let's look at an instructive case.

Last week, Wall Street's in-house cops fined St. Petersburg, Florida-based Raymond James Financial Services and Raymond James Associates a total of $17 million for botching the rules meant to deter suspicious transactions by drug lords, penny stock hucksters and other dregs of society.

The two subsidiaries of Raymond James Financial Inc. earned the distinction of paying the biggest Finra fine ever for violating anti-money laundering regulations, known as AML.

It wasn't the first time a Raymond James unit wound up writing a check to Finra for running afoul of AML rules. Only four years ago, the authority slapped Raymond James Financial Services with a $400,000 fine for its poor oversight of the account of a customer who was running a Ponzi scheme. Finra's message in the settlement of that case: Review your procedures and fix them.

At the helm of the anti-money laundering operations for Raymond James & Associates since 2002 was Linda L. Busby, who had been with the firm since 1995. Although neither she nor the subsidiary she worked for was named in the 2012 case, Finra said in its settlement this month that the two AML operations have had a "close affiliation." Raymond James Financial Services "heavily relied upon" Raymond James & Associates to provide AML systems and tools, Finra said.

In this month's settlement, Ms. Busby was suspended for three months and fined $25,000.

In Finra-world, it's unlikely she will ever pay, because the Wall Street self-regulator only expects her to make good on the fine if she wants to get back into the securities business. Busby's lawyer, Andrew W. Sidman, said his client "is enjoying her retirement" these days.

He added that she is "very proud of her many AML accomplishments dating back to 2002."

The two Raymond James units and Busby neither admitted nor denied the charges in their settlements last week with Finra. In a statement, a Raymond James spokesman said the firm has hired new staff, including a new chief AML officer, and taken other steps to better monitor and detect suspicious activity.

While Busby was managing the Raymond James & Associates AML operations, she also was signed up to evaluate investor disputes as a Finra arbitrator. Her regulatory records say she joined the pool of adjudicators on September 4, 2004.

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