FINRA As SRO Battle Heats Up As Industry Participants Form Lobbying Group

Friday, June 01, 2012 11:18
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FINRA As SRO Battle Heats Up As Industry Participants Form Lobbying Group

Tags: FINRA | regulation | sec | SRO

The regulatory fight is heating up against the designation of FINRA as the industry’s self-regulatory organization (SRO). A group of financial services firms including Schwab Advisor Services will meet with lawmakers in Washington, DC on June 7 to argue against the bill introduced by House Financial Services Committee chair Spencer Bachus (R – Alabama) in April.

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The meeting is viewed as a lobbying effort by industry participants against the creation of SROs that would take oversight of industry firms from the SEC. The SEC has been criticized for not policing the industry effectively enough, especially in light of the Madoff scandal and the view that more could have been done to prevent the 2008 credit crisis.
 
Instead, the lobbying group would like to see the SEC retain its oversight role and beef up the support it needs to adequately conduct examinations of industry firms. POGO (the Project on Government Oversight), a government reform group, also opposes the bill (titled the Investment Adviser Oversight Act) and sent a letter to House Financial Services Committee members stating that, in its view, FINRA has an inherent conflict of mission and lacks transparency and accountability.
 
Of course, FINRA takes the opposite stance, saying that POGO failed to acknowledge an SEC admission that it only has the capability to review 8% of the approximately 12,000 registered investment advisors on an annual basis.
 
The SEC study revealing that capability recommended three ways to address the problem: allow the SEC to charge user fees for each exam it conducts, create an additional SRO, or empower FINRA to broaden its oversight to include both brokers and independent RIAs. The industry seems to be gearing up for a significant battle to keep that third option from happening.

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