Schwab Makes Eleventh-Hour Case As RIA SRO Deadline Looms Hot

Even as the SEC hopes to finalize its position today on whether advisors should remain under its supervision or move toward a self-regulated format, Schwab Advisors will go on the record as being strongly against any fundamental change in RIA oversight.

As the biggest independent advisory custodian, Schwab's opinion carries enormous weight in the industry, which means its unexpectedly negative statement on Thursday came as a bit of a surprise to those who expected the big institutional players to more or less sit the debate out.

Schwab's argument boils down to the notion that SEC regulation isn't broken as far as fiduciary advisors are concerned, so it doesn't need to be fixed. Even if the fiduciary standard is extended to brokers -- an idea Schwab supports -- the two business models are so different that squeezing them into the same regulatory framework would be counterproductive.

It remains to be seen whether Schwab's sudden "no" position impacted the SEC's timetable for releasing its own opinion on the issue. Given the fact that today -- the deadline for the SEC's report -- is a federal holiday, some had speculated that the report would actually come out last Friday, but that didn't happen.

If anything, it will be a minor miracle if the SEC resolves its own internal disputes to deliver an opinion at all, much less on deadline. At least three of the four commissioners need to sign off on the report, and since Mary Schapiro has recused herself, the remaining trio need to find a unanimous position.

The SEC is facing significant budget pressure that could encourage it to hand off RIA oversight to a new SRO or to FINRA. But now that Schwab has joined planning groups to oppose the idea, that proposition may no longer be quite the "done deal" it looked like last week.