Bachus-McCarthy Bill Exempts Those With Wealthier Clients, Leaving Small Firms To Bear The Bulk Of The Burden

Wednesday, June 06, 2012 08:39
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Bachus-McCarthy Bill Exempts Those With Wealthier Clients, Leaving Small Firms To Bear The Bulk Of The Burden

Tags: Congress | FINRA | regulation | SRO

If you’ve thought that advisors are not expressing opposition to the Bachus-McCarthy bill and the idea of creating an SRO to oversee both brokers and independent advisors, you probably haven’t talked to anyone in Massachusetts. A survey conducted there among 300 advisors in the state firmly—as in 98% kind of firmly—shows opposition to the House Financial Services Committee’s proposition.

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Sixty-nine percent of that 98% said the impact would be significant. They would have to reduce staff and funnel other funds from areas like client service to pay the membership fees. Others said it would drive them out of business.
 
Ironically, there seem to be some loopholes in the proposed bill. Consumer advocate Barbara Roper brings attention to the fact that some advisors who have wealthier clients would be exempt. Advisors whose clients invest in hedge funds, charitable funds, retirement plans, and pooled mortgages would be, apparently, exempt from having to join an SRO created by the Bachus-McCarthy bill. Any individual with $5 million or more in investible assets would also be exempt.
 
This would place the burden of SRO membership squarely on smaller firms. Without the coffers of wealthier advisors to even out the costs, smaller firms will have to face options much like those cited by the Massachusetts advisors who participated in the survey.
 
How, then, would this improve oversight of industry firms? It wouldn’t. Instead of better regulation, we’d just have more. Instead of broader regulation, we’d just be doing a class shift that would create the industry’s own version of the 99%.
 
Roper also sheds doubt on the sincerity of the House Financial Services Committee’s quest to provide better oversight. She notes that instead of good, healthy debate, the committee has lined up three witnesses from the broker-dealer community (out of a total of six) and completely shunned input from the FPA, the CFP® Board, or NAPFA.
 
Here’s a list of those slated to testify as well as a link to other information about the Congressional inquiry slated for 10 a.m. Eastern Time on Wednesday, June 6.The site also has videos of hearings that have already occurred and an archive tab so it's likely you'll be able to view the hearing after the fact.
 
This is getting closer to home. If you haven’t yet become involved and have not yet expressed your views on the matter, you may wish to reconsider before things get decided for you. Think one person can’t make a difference? Then maybe you haven’t heard of Mahatma Ghandi.

 

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