Not doing the best that they can for their customer. So those instances often will be something where they may have recommended to the customer a security that is really not suitable for the customers financial condition. Or that they said something that wasnt accurate or was misleading about the security and trying to get the investor to put their assets into that product. When you are watching Late Night Television at 2 00 in the morning you see investment products, might some of those be included in the brokers and things that you oversee . They might. So we have a pretty strict set of rules about how brokers advertise. The really, really bad products if you looked at them closely you would find they are not securities. The ones where they say guaranteed 10 return. Brokers are not allowed to say there is a guaranteed return and not allowed to project the return. When i see these in a local newspaper i look closely and see it turns out it is not a prod t product. If brokers were to do this this would be a big problem for us. Its not illegal. In your industry its illegal. Thats right. There are other products that can be sold that arent subject to the same restrictions. We have our conversation with bob colby of finra on the morning where the usa today morning has dow off to rotten start in september. Does it change or accelerate the way bad brokers operate . So it more reveals how they have operated. So a good broker gives good advice to their customer and good advice typically in this uncertain world that we live in means that the products that they buy will be diversified. So what a sharp drop in the dow shows if a customer has sustained severe financial harm it usually means the broker didnt advise them away from a very concentrated position. So a diversified portfolio would be some stocks, some cash, some fixed income products. So there would be some losses but not catastrophic losses. We have calls waiting for bob colby from our viewers and radio listeners. Lets go to new york, democrats line. Steven, welcome. Caller good morning. Can you hear me . Im not hearing you. There we go. Go ahead. Caller can you hear me . We can. Go ahead. Caller my concern is the General Health of the u. S. Economy and the world economy. Im thinking the government cant save us. Right now u. S. Gdp is 16 trillion. The world gdp is 62 trillion. Wall street is currently trading 186 trillion in bad derivatives right now. When that bubble bursts sometime next year the world doesnt have the capital to recover from that collapse. The government needs to start telling our people the truth. Obama is only praying that the collapse doesnt happen during his administration. That is all i have to say. Bob colby, any thoughts . Well, so its a little bit outside of our zone, but i think that we have made a lot of progress in dealing with these derivative issues. The act gave banking regulators a lot of new tools to deal with derivatives. So the number that steven cites is i think an overall number but when you net it all down its not as extreme as that. Banks are required to have capital to offset those derivative positions. We have made a lot of progress since the 08 crisis in dealing with this derivatives. What about brokers who are not banks . Brokers that are not banks do not have large derivatives positions because the way the sec net capital rules work they have a very sharp charge against derivatives positions. Derivatives are not typically held in nonbank derivatives capital. Peter in alaska. Independents line. Good morning. Caller good morning. I just have a question about the structure of finra. He said they are a nonprofit. Does that mean the organization is an ngo . Listening to him speak they obviously have a lot of power to go into offices. The people have to report to them. Are they a subcontractor of the federal government . I had the impression ngos were more of a private organization. Explain to me more of the structure and how they obtain the power that they have to do the things they are doing. Peter, its a great question. And i skimmed over the complexities of it. What happened was that congress in 1934 decided that they wanted to give the sec more support in overseeing this market. So they set up a structure by which an Association Like finra would register with the sec and be overseeing, extensively overseeing by the sec and they required all the securities firms and Brokerage Firms to register with finra. That gave quasigovernmental power to help enforce the rules. We are not a Government Agency but we exercise functions like a Government Agency but subject to the very careful supervision of the sec to make sure that we dont use that authority abusively. Part of the reason we have you on is we saw the headline last week about Charles Schwab being fined 2 million by finra and finds the company had cash inflows that exceeded the amount that can invest with existing facilities. Explain that a bit for us and would the sec also levee a fine in this case . So this is an sec rule that we were enforcing. This is an example of a situation where were assisting the sec in making sure that Brokerage Firms are complying with rules. So typically our examination unit kwoecoordinates with the so we dont look at the same activity and dont bring fines on the same activity. Sometimes we do where we look and say there is a finra rule aspect to this and an sec rule aspect and they want to apply the fine on the sec rule and we want to do it on the finra rule. Typically we dont look at the same activity. This is a fairly complicated Financial Capital requirement that they violated. But the essence of it was that securities firms are required to keep their customer funds completely separate from their own. This was a situation where schwab didnt completely distinguish those customer funds. If that fine gets paid where does that go . It goes into finra but it goes it doesnt go into the general revenues of finra. For example, finra in addition to overseeing the Brokerage Firms it oversees trading in the Securities Markets. So 99 of the trading runs through computers that are run by finra. These computers were actually in the cloud but are massive. So we process 50 billion transactions a day. You mention that earlier because we are looking at every order that gets submitted in the stock markets. So these fines might go pay for the computers we are using to process. It doesnt go to pay for ordinary operating expenses. Computers looking for anomalies . We are looking for manipulation or front running of customer orders or where they are not getting the best execution possible for the customers. So theres developed a lot of active trading in the markets and looking to see people that are trying to push the prices up and then let them fall again and then buy. Here is rachel in south carolina. Democrats line. Caller hello. Good morning. Caller i watch you and cspan for the last 20 something years. I dont know if you can answer this question for me, but i have a 401 k in walmart and i am months trying to get that money so that i can stay in my house. I had to move out and move in a trailer simply because the people are not sending my own money. They send me a note saying that they are taking out almost 800. Could you speak on little old ladies like me . And i will listen. God bless you sir. So i heard you say you have money in a 401 k with walmart . I think thats what she said. You are getting difficulty getting them to give you the amounts that you are owed. Im very sorry to hear this. It must be a very frustrating for you. This is not our area of regulation, but what i think you should do is contact if its walmart that you are trying to get the payment for, contact them and dont wait for an answer just from the initial contact. You should escalate it and contact higher and higher officials at walmart until you get to someone that takes your situation seriously and pays attention to you. We go next to virginia. Lowell on the republican line. Caller good morning. I have a question about mutual fund cs. I know i get all of the information on the percentages and the rates and all of that. I was buwondering, is there a requirement or is it my prerogative that i can ask my mutual funds how much i actually paid in fees . Can i get can i ask them to give me a fee statement per fund . I am very curious. A lot of people that have 401 ks and mutual funds would probably be astonished at how much it costs us in fees to maintain a mutual fund. I will take my answer off the air and thank you very much. Well, youre absolutely right to be focused on the fees you pay because fees can reduce the return on an investment a remarkable amount particularly over years and years as they accumulate. So whether you can ask your particular mutual fund for an individual statement i dont know. Typically they dont do that. But one place i would suggest you go is to finras website where they have a Mutual Fund Cost and fee calculator that is helpful in calculating the particular fees that you pay from particular mutual funds and see if that helps you. If not, i think you will have to work your way through the documents from the mutual fund. Its definitely worth your type. A couple of comments on twitter. A tweet asks has finra ever uncovered unusual options for the purpose of insider trader . We have units that watch options trading. We are monitoring across the market 65 of the options trading now. Often times the Insider Trading is done by people that arent securities firms themselves. Its sometimes people that are individual traders sometimes from other countries. So we fairly often find patterns that look anomalous. It looks like someone has individual nonpublic information and are trading ahead of it. When we get that information we refer it to the sec. We make 500 or more fully researched referrals to the sec each year. Some of them have been very productive. There was a referral where it ended up the sec filmed somebody in a parking lot handing over information and receiving bags of money. We detected the background. Gave them the tip and they followed up and brought a very important Insider Trading case. Finra is monitoring a lot of trades. Do you have active role in the operation of the market in terms of overseeing things or responding to things like the famous flash crash of a couple of years ago . So we dont operate markets ourselves. Our predecessor Organization Established and built the Nasdaq Market but years and years ago that was set up as a separate exchange. We dont have a direct role in a market itself. We operate information reporting systems so we operate the trade reporting system that tracks every trading. We also operate transaction reporting system in the overthecounter market. We watch the trading for all these and we join with the stock exchanges in putting on restrictions like the limit up and limit down restrictions that you are referring to. Overthecounter otc. It means its an old phrase that meant that you would buy stocks from somebody across a counter like we have now. What it refers to now is stocks that arent listed on an ex change but maybe actively traded by securities dealers. Lets hear from fort lauderdale, florida. Caller i would like to make three very important points. Number one, the small caps are being shorted. Goldman sachs representative admitted on television that the minute any stock goes up 5 that they short it automatically with their high speed trading. Now, number one, the shorting of a small cap techs and bio techs you have no idea how much blood, sweat and tears are put into these companies to try to make new discoveries in medicine and technology. And you have companies that short these stocks because they might be competitors. What happens is if a company like google which stole technology from a company and it is fact because they stick sticky notes and saying they did it when they return the material inadvertently. When they do Something Like that then all of a sudden the nasty stories on the street on this one and that one and all the little financial newspapers. You all have got to stop allowing these people, these corporations and other people these traders, hedge funds shorting these Young Companies that are coming public. This is where the jobs of tomorrow are. This is where the cures and the new technology is. It is not necessarily in the big pharmaceutic pharmaceuticals. And you have allowed this shorting to go on in a way that is just unbelievable. And, by the way, people arent all jumping in at 2 00 in the afternoon and selling all of their stocks. These are hedge funds selling the indexes. They are controlling a gang of hedgefunds. One day they say its china and the next day they say its this or that and then change it the next day. You have got to do something to stop this crazy shorting thats going on in these markets. As a matter of fact, some countries dont allow any caps under 5 to be shorted. This is something that the sec doesnt care about these little companies that no one cares about them. And they struggle and end up failing because they have to borrow from toxic loans from hedgefunds because banks wont help them. No one helps them. A couple of points there. Appreciate your call. We will hear from bob colby. So i agree with your view that these Small Companies are often the engine for our economy and they can be fragile when they are in a young stage. So the sec sets the short sale rules. They have gone back and forth on this. There was a short sale rule that they got rid of before the financial crisis but then they brought it back when there were sharp declines. Our role is to watch carefully for whether people are reporting the shorts they do and whether they are complying with the short sale rules that the sec established. We brought some cases recently for people that failed to report their short sale activity which, of course, makes it difficult for us to enforce the rules. Mentioned something that hedgefunds and selling off 2 00 in the afternoon everybody selling. Do you know what she is getting at there in terms of hedgefund activity . It sounds like sarah has some particular trading pattern that she has observed that im not familiar with. Would finra be in a position to observe those sorts of activities . Yes. So as part of our Market Monitoring we have patterns that we have designed that try to look for anomalies in the trading to see if there is something either manipulative or abusive or somehow distorting the trading. If we see it we go and examine it. And either bring an action or refer it to the sec. Lets hear from georgia. John on our republican line. Good morning. John, make sure you mute your television or radio and go ahead with your comment. Caller i just have two brief questions. Just mute that television, john. You are confusing yourself. Go ahead with your question. Caller i have two brief questions. Actually, a third one. The first one is on the republican line, would it be better first of all, why havent the Republican Party ever supported Social Security . And then when you talk about hedge funds and the stock market, both of you gentlemen are roughly about my age or a few years younger. The japanese have came so far within like 45 or 50 years. If we were to use that model, could it work here . Thats the second question. And the third question is that george bush was the president of the United States for eight years. Most journalists usually back out on his question. He never even showed up at the Republican National convention. I dont know if there is a sitting president who has ever done that. John, we are focusing on the financial markets. Any thoughts there . I think johns understanding his what about new trading markets like the whole bit coin phenomenon . As a new market develops would finra be involved in monitoring those markets . So we work actually very closely with new exchanges. If you are going to be a new Securities Market you have to be a dealer or an exchange. Exchanges register with the sec. There are some new ones in the process of trying to register. There is one called iex that was designed by the people who were heroes of the flash point book. We are talking to them about whether we can help support their oversight of their market. What do they want to trade . They want to trade listed stocks. They pleev they have a better design that will help people parade without the influence. I dont know if they have a better mouse trap or not we are happy to assist them in the oversight. Chief Legal Council with finra. We go to vermont. Caller i have a question for mr. Colby. Actually, i was wondering what he thought about the repeal back in 2000 i think it was. I think the separation of investment and commercial banks is probably one of the biggest reasons why we are seeing this big turmoil in the markets because what is happening is s p 500 u. S. Companies half the sales are coming from overseas and our china markets, our asia markets. There is no way possible you can tell me the trillions of dollars we cant visualize that. Money is digitized, digitalized, whatever, i cant say the word. We cant mentally see a picture of money anymore. It is basically in a computer. That is why i say metals going up and oils going down because they basically want to put fracking out of business in the u. S. And they want us to be basically controlled by the middle east arab oil. I think glasssteagall needs to come back. I think president clinton did a disfavor by enacting the modernization act in december of 2000, his last month in office there. Thank you. Well hear from bob colby. Tell us what glasssteagall did. Glasssteagall was requiring commercial banking from Securities Brokerage so to keep those two activities complete l separate and said those could be conducted by those owned by the same holding. It allowed recombination of Investment Banking and commercial banking. And so i dont feel as strongly about this as you do because i observed a lot of recombination had taken place already before it was adopted. What i think is critical is that once you allow these activities be recombined that there be complete and adequate supervision of the activities so nothing falls in the cracks. Wh