There are disagreements in the industry on the type of person FINRA should hire to fill the enforcement position being vacated by Susan Merrill. But there is a general consensus that the industry regulator should take this opportunity to beef up oversight.

Merrill announced last week that she plans to step down, although no date is set for her departure. FINRA did not return phone calls to talk about its search, and outsiders say that it is too early for a short-list of names, or even rumors swirling around specific people. It could take months before the slot is filled, according to some in the industry. But with scandals like the oft-cited Madoff case that went undetected for years, there is certainly a high level of anticipation to see more regulatory oversight.

Louis Harvey, a consultant for the industry, said that FINRA needs to adopt more of a detective role than auditor. It needs to focus more of its attention on looking for clues of wrongdoing, following up leads and encouraging people to come forward with information of misconduct, he said.

In that vein, he said the organization should broaden its search to find someone from law enforcement.

Richard Roth, founder of the Roth law firm, agreed on the general premise, although he’s not sold on the law enforcement angle.

“Now is the time to focus on what’s wrong with the system,” he said. But he said a person from within the industry would be better prepared to prioritize and really make significant improvements.

FINRA needs “to be tougher, but tougher on the right people,” he said. It needs to spend its energy on the bigger transgressions like stealing clients and years of churning, as just two examples, he said.

Rather than a law enforcement chief, he would rather see someone who served as a senior compliance manager at a big firm for about 25 years.

To be sure, FINRA has flexed its enforcement muscle several times in recent days. On Monday, it closed broker-dealer Gunn Allen for failing to keep its net capital at an acceptable level. And last week, it expelled broker-dealer Provident Asset Management from the industry for marketing a series of fraudulent private placements offered by its affiliate, Provident Royalties. A public statement from FINRA called it a “classic Ponzi scheme.”

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