FINRA is putting its plans on hold to become the SRO to oversee investment advisors.
Noting that there seems to be little momentum in Congress to create an SRO to help the SEC examine more advisors on an annual basis, FINRA chief executive Richard Ketchum insists he is not giving up.
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He and backers for the SRO continue to assert it would increase investor protection by amplifying resources beyond the SEC’s current capacity.
A study mandated by the Dodd-Frank Act showed that the SEC could conduct annual examinations of only 8% of the 12,000 advisors under its watch.
After some adjustments made relative to Dodd-Frank, the SEC now oversees about 11,000 advisors.
FINRA examines its 4275 registered broker-dealers approximately once every two years.
FINRA has lobbied hard in Congress for two years to become the SRO but the effort died out after the Bachus-McCarthy bill failed to make its way to a vote.
Investment advisors are opposed to the SRO legislation, saying a new layer of regulation is unnecessary and costly.
FINRA may be rethinking its legislative priorities but advisors should not think the matter will simply go away.
FINRA has the backing of the Financial Services Institute Inc. (FSI), which says FINRA is reassessing the situation but is not giving up.
Since the SRO matter has moved down on the priority list
, FINRA will likely focus on broker-dealer conflicts, structured products, and high-frequency trading.