SRO Bill Introduced In The House Will Likely Fail In The Senate

Monday, April 30, 2012 10:40
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SRO Bill Introduced In The House Will Likely Fail In The Senate

Tags: FINRA | regulation | sec

The introduction last week of a bill that could make FINRA the industry’s SRO may not matter that much in the scheme of things. This is because the Senate has become known for killing House bills. The bill could sail through the sponsoring Representative’s committee and even gain enough votes to pass on the House floor.

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But that’s where it all could come to a halt. The reality is that we don’t know the designation for the next SRO. We assume that one of them will be FINRA. Whether there is one or multiple so-called national investment advisor associations (or SROs) is yet to be decided on. But this particular legislative process is important because it will transform the industry.
 
The Senate may not take the baton from the House but if an SRO is not established this year, it likely will be next. Pushing the decision into 2013 would take some of the political pressure out of the process. Proponents of the bill say that establishing an SRO would strengthen the SEC’s watchdog capabilities. Opponents say added regulation by an entity not well-versed in the principles of fiduciary duty will only add costs with few benefits.
 
Either scenario, however, offers time for advisors on both sides of the issue to make their views known. This could influence the way representatives vote and impact the effect the bill has on the industry.

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