Finra’s enforcement chief, Susan Schroeder, is planning to leave the self-regulator later this year.
As head of Finra’s Department of Enforcement since 2017, Schroeder has been the face of regulatory enforcement for broker-dealers at a time when the industry has also dealing with increased scrutiny from the Department of Labor and state regulators.
Jessica Hopper, Finra’s deputy head of Enforcement, is replacing Schroeder in an acting capacity.
Finra, which didn’t disclose the exact timing of Schroeder’s departure, says it will undertake a search for a new Enforcement boss and will consider both internal and external candidates.
"Strong, consistent enforcement is critical for Finra's mission of protecting investors and market integrity," Finra president and CEO Robert Cook says in a statement. “The transformation of the enforcement programs under Susan's leadership has enhanced Finra's ability to advance that mission and target developing issues that can put investors and markets at risk.”
Schroeder led the consolidation of Finra's enforcement functions into a new, unified group.
The consolidated enforcement team now has 340 employees working in New York, Rockville and 14 district offices handling disciplinary actions from across the SRO, from potential fraud to trading-based misconduct to sales practice violations.
Finra’s unified Department of Enforcement was the result of Finra360, the organization's ongoing comprehensive self-evaluation and improvement initiative.
The new unit brought together two distinct enforcement teams within the organization — one handling disciplinary actions related to trading-based matters found through market regulation surveillance and examination programs, and the other handling cases referred from other regulatory oversight divisions including member supervision, corporate financing and advertising regulation.
Commenting on her planned departure, Schroeder says she is “proud of the innovative solutions” Finra has implemented.
"Enforcement removes bad actors from the market, returns money to wronged investors, and prevents future harm — critical functions so that investors can rely on a safe market to fund their educations, retirements and lives. I am so grateful to have been a part of that important work,” Schroeder says in a statement.
According to Finra, under Schroeder's leadership the SRO delivered significant enforcement actions that won restitution for harmed customers, including for misconduct involving unsuitable recommendations and excessive trading in customer accounts.
Finra says Schroeder also led the launch of a targeted self-reporting initiative to promptly compensate harmed investors and promote firms' compliance with the rules governing the recommendation of 529 education savings plans.
Other significant cases during Schroeder's tenure resulted in sanctions to remedy misrepresentations to investors regarding 401(k) programs and variable annuities, sales of IPO shares to insiders, violations of screening requirements for firm employees, disclosures of inaccurate research ratings, and violations of rules regarding anti-money laundering, market access and short selling, according to Finra.
Reacting to Schroeder’s planned departure, New York-based lawyer Bill Singer, author of the blog site Broke&Broker.com and a staunch critic of Finra, says Schroeder has been “among the finest industry regulators” he has known.
“Susan brought a rare combination of humor, savvy, street smarts and pragmatism to her job. She never postured. When you talked to her, you spoke with a human being who seemed eager to find a fair and constructive resolution to a given dispute,” Singer says.
Dennis Concilla, Ohio-based head of the securities litigation and regulation practice group at law firm Carlile, Patchen & Murphy, says the initiatives that were recommended by Finra360 have benefitted both the industry and the SRO.
Concilla expects Schroeder's efforts to bring about needed changes in Finra enforcement to continue.
“One of the more frustrating issues practitioners found in dealing with Finra over the years was what appeared to be a lack of consistency between the different regional offices as it relates to enforcement,” Concilla says. “That has definitely improved over the last few years although my personal observation is that it often produced harder standards.”
Prior to becoming the Finra’s head of Enforcement, Schroeder was senior vice president and deputy chief of Enforcement for six years.
Before joining Finra, she was a partner at law firm WilmerHale's securities litigation and enforcement practice.