A regulator doctoring records is a relatively minor infraction as far as Congress is concerned. The perception that FINRA gave MF Global executives a free pass before that firm's collapse is a much bigger deal.
People are noticing that FINRA gave John Corzine a waiver on his securities exams after he came back to the industry in 2010.
Since he didn't make the bad trades that doomed MF Global, on the surface the free pass seems relatively innocent.
But since about $600 million in MF Global clients' money is still missing, anything less than absolute by-the-book compliance looks pretty bad.
If FINRA was happy to bend the letter of the rules for Corzine, the head of the firm, what does that tell the public about the way the regulator dealt with street-level enforcement?
Did his employees know he was only licensed on paper?
We'll never know whether MF Global would have kept better records if Corzine had had to retake his securities exams on a regular basis like everyone else in the brokerage world.
But two short weeks after the SEC had to tell FINRA to clean up the way it handles its own documentation to avoid "creative mistakes," lawmakers should be wondering whether lax enforcement is costing investors money and the good actors in the industry their reputations.
Isn't that the opposite of the way regulation is supposed to work?