A Lot Of Axes To Grind In Advisor Regulatory Panel: RIA SRO Only The Tip Of The Iceberg
- Created: Wednesday, 14 September 2011 06:42
Madoff came up again and again in yesterday's House Financial Services panel.
The importance of more frequent exams for advisory firms came up a lot. Worries about whether the SEC is up to the task -- due to competence or funding -- were frequently expressed.
As far as the people who write and vote on legislation are concerned, what RIAs are all about and how they fundamentally differ from broker-dealers are peripheral issues.
Congress wants tighter regulation on investment advisors to prevent future Madoff situations. SEC commissioners have signaled that they're willing to abdicate the responsibility in order to use their budget to meet what they see as bigger priorities.
With that in mind, FINRA has stepped up as the alternative. Rick Ketchum, head of the broker-dealer self-regulatory group, can point to more regular exams for member firms and a somewhat better track record when it comes to getting rulings past courtroom challenges.
It's a tough situation for advisors who don't want to move to FINRA or a similar -- currently hypothetical -- self-regulatory structure.
As David Tittsworth, head of the pro-RIA Investment Adviser Association notes, "there is no silver bullet" here. Whatever happens is going to be a compromise between competing agendas and hard reality.
Senior Democrats on the panel seem married to the idea that if the SEC had more money to spend, the problem would go away. And some question whether FINRA can do any better.
Maxine Waters from California made that case most strongly: "Rather than farming out those responsibilities to private entities, it is essential that we provide the SEC -- our cop on the beat on Wall Street -- with the funding it needs to do its job."
And Ruben Hinojosa of Texas, a passionate fan of retail investor education, is not a fan of FINRA's track record for transparency, much less its as-yet-unknown ability to handle advisory concerns.
But at this point, it looks unlikely that SEC will get a lot more money. It is simply too unpopular in Washington right now.
In the absence of other solutions, Congress seems more interested in hammering away on other agendas: small government, small business, private regulatory entities, consumer choice.
That's probably why this panel was so crowded with special interests -- two insurance organizations, two broker-dealer groups, only one consumer advocate and one RIA group -- while what to A4A readers is the central issue got somewhat short shrift.
This Website Is For Financial Professionals Only
- NAPFA Must Do The Right Thing With CPA/PFSs If It Wants To Retain Its Special Role As An Advocate For Consumers
- CFA Level 1 Exam Prep Now Being Offered By The American College, Reflecting The Growing Popularity Of The CFA Designation
- Charles J. Yang, CFA, Elected Chair Of CFA Institute Board Of Governors
- NAPFA, In Saying Only CFPs Can Become Members, Snubbed The AICPA, Exposing Fractures In The Movement To Professionalize