Bill To Make FINRA The SRO For RIAs Reintroduced, Sparking Protest In Some Quarters And Approval In Others

Wednesday, April 25, 2012 14:12
Bill To  Make FINRA The SRO For RIAs Reintroduced, Sparking Protest In Some Quarters And Approval In Others

Tags: FINRA | regulation | RIAs | SRO

The campaign to make FINRA the self-regulatory organization for Registered Investment Advisers was renewed today as House Financial Services Chairman Spencer Bachus reintroduced legislation that would create the SRO.


With reporter Melanie Waddell of AdvisorOne recently predicting that creation of the FINRA SRO was imminent, the reintroduction of the bill by Bachus sparked protest in some quarters of the advisor business but was welcomed by others. 

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Comments (2)

FINRA is my worst nightmare. Corrupt and incompetent. Who is going to look out for investors? My preferred solution is to charge investment advisors a fee sufficient to cover SEC regulation. For all their shortcomings, many due to underfunding by Congress, at least they are not total todies for the wire houses and broker-dealers. Ithought I had left the stench of NASD behind when I went independent 18 years ago.
FrankArmstrong , April 26, 2012
Wow, so Libertarian politicians that made sure to eviscerate funding for the SEC now claim that the SEC doesn't have the resources to do the job so there's no choice but to rely on FINRA- which will cost more to implement and will be less effective at promoting service models that would serve the public best since their true Masters are the large broker dealers.

Its like a Bizzaro world- the SEC doesn't have adequate funding, and we're not going to provide adequate funding through general budgeting, and we're not going to allow the SEC to charge fees to advisors, so what we'll do instead is require that advisors pay fees to FINRA which will end up being higher than fees they would have been paying the SEC, and the SEC may also require more funding from general budgeting so they can oversee FINRA. It's like Ayn Rand's nutty fantasies have been adopted as Truth. Too bad Libertarians fail to see that Ayn Rand ended up living off the government dole because her economic philosophy is no more practical or reasonable than the Communism that so damaged her psyche as a child.

FINRA's view is to allow virtually any financial product as long as investors sign off on disclosure. Unfortunately it is abundantly clear that investors have near zero chance of understanding many FINRA approved disclosures- which is why investors seek professional guidance in the first place. That is the very definition of a fiduciary relationship, and disclosure signing under the guise of giving investors "choice" is an abdication of fiduciary responsibilities. Broker/dealers know this, which is why they seek a weak definition of fiduciary so they do not have to take responsibility for serving their clients' best interests.

The Financial Services Institute wants to claim that the playing field isn't level, but Mr. Brown is attempting to obfuscate the real issue when he says the main reason is lack of supervision of advisors. The real issue is in a profession where a fiduciary relationship exists, if business models that have significant conflicts of interest are allowed to exist, then they need more oversight.
bramsay , April 26, 2012

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