Not that we needed even more evidence that Wall Street’s primary self-regulator is a challenged organization when it comes to protecting investors but in a lead commentary in today’s Wall Street Journal, we got it.

The Financial Industry Regulatory Authority “routinely” strips out some possible red flags on brokers from its database in the information it makes available to investors, according to a study released Thursday by an organization of lawyers who represent investors in claims against brokers. 

The study followed a Wall Street Journal investigation, which disclosed in a page-one article Thursday that more than 1,600 brokers’ records don’t show personal bankruptcies and criminal charges that should be reported.

Criminal charges huh? Such as,

The criminal charges uncovered by the Journal, which don’t show up on brokers’ records—in accordance with the current rules—include assault, sexual contact without consent, hit-and-run and habitual substance abuse.

Would you want to know if an individual soliciting you has a rap sheet with charges such as those? I would.

FINRA would maintain that how could they possibly keep up with the hundreds of thousands of brokers populating our nation and that fairness dictates that some material be expunged. I am all for rehabilitation but I am also a big proponent of protecting investors many of whom are senior citizens viewed as easy prey by unscrupulous brokers.

Investors can look up brokers on a Finra website called “BrokerCheck” and quickly find out their professional history. But the Public Investors Arbitration Bar Association, the lawyer group, said Thursday that Finra was scrubbing potential black marks from the information it provided to investors.

Scrubbing black marks? How do you spell complicit? How about ‘aiding and abetting?’

Finra defended its BrokerCheck tool. “While the system may not be perfect, we do have to make determinations on what information…is appropriate to release, while at the same time balancing fairness,” it said.

Fairness? Please.

How is it that ex-cons are in a position to solicit often uninformed and largely unprotected investors? I will tell you how. Because the meter maids running FINRA do not hold the banks and brokers who hire ex-cons to proper account when bad practices occur. When penalties do not fit the crime, then the message sent to the industry is ‘keep doing what you’re doing.’

While we fully check and disclose the backgrounds of the ex-cons how about we also mandate that the execs running FINRA also release all the data and records regarding a whole host of other questionable practices (kangaroo courts, misappropriation of funds, allegations of lying and so much more) surrounding FINRA itself.

For those unaware, FINRA is not subject to the Freedom of Information Act — although it should be — and utilizes the defense of an absolute immunity privilege when challenged in court. Absolute immunity without total transparency is nothing more than a license to steal.

This edition of “You Can Not Make This Stuff Up” is merely further evidence that this self-regulator is in bed with the industry.

Navigate accordingly.

Larry Doyle

Check out my new book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.