Financial Industry Regulatory Authority Selects Robert Cook as New CEO

Former top regulator at the Securities and Exchange Commission to succeed Richard Ketchum, who is retiring.

Robert Cook, shown here in 2012 with then-chairwoman of the SEC Mary Schapiro, has been named CEO of Finra. PHOTO: ZUMA PRESS

Updated June 13, 2016 2:53 p.m. ET

A former senior official at the Securities and Exchange Commission will take control of Wall Street’s self-regulatory authority, which has been playing a more direct role in policing market manipulation and using technology to detect patterns of abusive trading.

Robert Cook, who led the SEC’s trading and markets division from 2010 to 2013, will become chief executive of the Financial Industry Regulatory Authority in August. Mr. Cook, a partner at law firm Cleary Gottlieb Steen & Hamilton LLP, previously oversaw the SEC’s efforts to implement circuit breakers and other measures that were a response to the May 2010 flash crash, when nearly $1 trillion in equity market value was wiped out before prices rebounded.

Finra, whose decisions are overseen by the SEC, has become an increasingly important regulator of equity and fixed-income markets as it expands its reach beyond policing the sales practices of stockbrokers. It now monitors nearly all trading on exchanges and is competing to build the first comprehensive audit trail of orders in the stock market. Its expanding agenda has attracted more scrutiny from Capitol Hill, where some lawmakers have voiced concerns that Finra is becoming a second version of the SEC, only one that is subject to less public inspection.

In an interview Monday, Mr. Cook said the industry-funded regulator can play an effective role that is distinct from the SEC’s. “It’s a front-line regulator, so it ensures that markets are fair for everyone, but it’s a self-regulator so it can bring together all of the resources and expertise to carry that out with no cost to taxpayers,” he said.

Mr. Cook, 50 years old, is widely viewed as a capable technocrat who worked around the clock at the SEC to craft rules required by the 2010 Dodd-Frank Act. He is well positioned to manage Finra’s agenda and represent the Wall Street regulator before Congress, said SEC Commissioner Michael Piwowar, a Republican who previously worked as a top economist on the Senate Banking Committee.

“Robert Cook is a fantastic choice,” Mr. Piwowar said. “When he was division director for trading and markets, he did a number of briefings for staff on Capitol Hill and gained widespread respect on both sides of the aisle.”

Finra announced Mr. Cook’s hiring Monday in a press release. Mr. Cook will succeed Richard Ketchum, another former SEC division director who is retiring from Finra.

The appointment of Mr. Cook shows Finra’s board is satisfied with the strategy that Mr. Ketchum oversaw, as Mr. Cook comes from a similar professional background, said Annette Nazareth, a former SEC commissioner and now a partner at Davis Polk & Wardwell LLP.

“Because of his years of experience as a practitioner and the time he spent at the SEC in the division of trading and markets, he’s probably one of the most knowledgeable people on market regulation in the business,” Ms. Nazareth said.

The process of picking Mr. Cook was a tightly guarded secret and was managed by a small committee of Finra’s Board of Governors, including Jack Brennan, the former CEO of Vanguard Group.

Finra officials declined to disclose how much Mr. Cook would be paid, but in years past, working as a Finra executive has been nearly as lucrative as working on Wall Street. Mr. Ketchum made $2.5 million in 2015, according to Finra’s most recent annual report. Its top lawyer, Robert Colby, made about $1 million, and its top enforcement lawyer, Brad Bennett, $925,000.

In recent months Finra has attracted scrutiny from both Republican and Democratic lawmakers. On June 6, Sen. John Boozman (R., Ark.) and Rep. Ander Crenshaw (R., Fla.) asked SEC Chairman Mary Jo White to detail how the federal agency oversees Finra.

“Finra has evolved from a membership association primarily responsible for examining and enforcing industry norms into a hybrid entity that enforces securities law alongside the SEC,” Mr. Boozman and Mr. Crenshaw wrote in a letter to Ms. White.

While Finra has a sizable role enforcing securities laws, its fines are significantly lower than those that government regulators levy, leading to complaints from Democrats. SEC Commissioner Kara Stein, a Democrat, has called its financial penalties “insignificant for the wrongdoers.”

Finra recently levied its second-largest penalty ever, $25 million, against MetLife Inc., related to the life insurer’s sales of variable annuities. (Its largest, a $50 million penalty against Credit Suisse First Boston Corp. over allegedly inflated commissions for hot initial public offerings, was in 2002.)

MetLife neither admitted nor denied the Wall Street watchdog’s findings, which concerned alleged violations between 2009 and 2014, according to the settlement. The company said it “fully cooperated” with Finra’s probe.

Last month Finra levied what it said was its largest anti-money-laundering penalty of $17 million against Raymond James Financial Inc. over reported failures in its compliance with anti-money-laundering rules.

A Raymond James spokesman said last month that the firm’s systems have since “undergone significant resource, process and technology enhancements,” including hiring more compliance personnel and expanding training and the use of software.

—Aruna Viswanatha contributed to this article.

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