Sizing Up The Powerful Forces Aligned To Fight Making FINRA The SRO For RIAs

Tuesday, December 20, 2011 14:06
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Sizing Up The Powerful Forces Aligned To Fight Making FINRA The SRO For RIAs

Tags: advisor industry people | CFP Board | Dodd-Frank | FINRA | RIAs | SRO

Last Thursday’s press conference went on for an hour but it took just three-minutes for David Tittsworth of the Investment Adviser Association to offer a scathing attack on the proposal to make FINRA the SRO for Registered investment Advisers.

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“So let me be clear,” Tittsowrth said in summing up,” enhanced investment advisor oversight is certainly needed, but giving that job to FINRA would be the wrong choice for a lot of reasons.”
 
IAA is a trade group with about 500 members that collectively manage more than $9 trillion.  Last week, IAA joined with the Certified Financial Planner Board of Standards,  Financial Planning Association, National Association of Personal Financial Advisors, and TD Ameritrade Institutional to announce the results of a study the groups sponsored jointly that supported their opposition to naming FINRA the SRO for RIAs.
 
Expanding FINRA’s power by giving it responsibility for RIA examinations and regulation would impose, said Tittsworth, executive director of IAA, “extraordinarily high costs on investment advisors, most of whom are small businesses." However, Tittsworth added, cost was not the main reason IAA opposes naming FINRA the SRO for RIAs.
 
“This is not a debate just about cost, although that’s the focus of the press conference today,” said Tittsworth. “We believe that FINRA would be the wrong choice for a lot of other reasons, including their lack of accountability, their lack of transparency, their weak track record, and bias favoring the brokerage industry and that regulatory model.”
 
 
Tittsworth then slammed FINRA.
 
“FINRA’s budget and its governance are not subject to oversight by either the SEC or Congress,” said Tittsworth. “FINRA is not subject to the Freedom of Information Act, the Administrative Procedures Act, and other laws that the SEC must adhere to.”
 
Near the end of his remarks, Tittsworth touched on an intriguing aspect in the alignment of powerful forces lobbying Congress over the future of RIA regulation. The North American Securities Administrators Association, an association representing state securities regulators, opposes naming FINRA as the RIA SRO.   
 
“Some organizations that are not represented here agree with these positions, including the Managed Funds Association, AICPA and The North American Securities Administrators Association,” Tittsworth said.
 
Cynical as I am about Washington, my guess is the alignment of these anti-FINRA groups will not be enough thwart the move to name FINRA the SRO of RIAs, a move supported by the largest Wall Street brokerages and banks.
 
Look at the array of firms aligned to fight the big Wall Street firms.
 
The Managed Funds Association probably does not have a lot of campaign contributions sloshing around Washington, D.C. So its influence is limited.
 
The AICPA with 380,000 members is stronger, but accountants are not exactly known for making large political contributions.
 
IAA is indeed a powerful group with a large base of money managers that undoutedbly could have Washington influence. However, among its ranks are the largest separate account managers that depend on wirehouse distribution. So I am not so sure how far IAA will go in fighting the big firms.
 
 
Let's face it, Wall Street firms still have far more influence in Washington than all of these groups combined.
 
While NASAA’s endorsement carries moral authority, betting on morality from Washington is unwise.
 
Sorry to be so cynical, but I remain skeptical that the groups aligned to thwart making FINRA the SRO for RIAs will be able to overcome Wall Street’s influence over Congress.

 

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