Financial Services Institute Wants FINRA to Serve as SRO for RIAs

The Financial Services Institute wants the Financial Industry Regulatory Authority to be the main watchdog over registered investment advisers. FSI, which represents 126 broker-dealers’ interests, endorsed FINRA in a letter to the Securities and Exchange Commission. Many of the broker-dealers that FSI represents are also RIAs.

FSI believes that not only has FINRA shown the ability to “equitably” distribute enforcement, examination, technology, and surveillance resources, but also, that the latter is knowledgeable about “the overlapping nature” of the services and financial products that both investment advisers and broker-dealers may offer. Coordinated Capital Securities, Inc. and 2010 FSI chair and president Mari Buechner believes that having a regulatory structure that puts the same emphasis on examining broker-dealers, investment advisers, and their affiliated financial advisers will improve investor protection.

Currently, pursuant to Section 914 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC is analyzing the need for improved oversight of investment advisers. Already, FINRA closely scrutinizes broker-dealers, while the SEC has acknowledged that insufficient resources prevents it from regularly inspecting over 11,000 registered advisers.

However, extending FINRA’s reach over investment advisers has generated controversy. FSI is the first business group to support giving FINRA this role. FINRA Chief Executive Officer Richard Ketchum wrote to the SEC last November noting that not only does there need to be an SRO for investment advisers, but also that his organization is willing to take on the part. Meantime, the North American Securities Administrators Association and the Investment Adviser Association continue to remain wary of both extending self-regulation and FINRA’s authority.

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Related Web Resources:
Financial Services Institute Endorses FINRA as SRO for Investment Advisers, Financial Services, December 20, 2010
FINRA

Investment Advisers, Stockbroker Fraud Blog, December 9, 2010
Institutional Investors Securities Blog