Financial Industry Regulatory Authority CEO and Chairman Richard Ketchum says that if the SRO is chosen to regulate investment advisers, it will tailor its oversight to that industry. At a compliance conference run by the Financial Market Association and the Securities Industry last month, Ketchum said that advisers’ concerns that FINRA would not comprehend the IA model are “simply wrong.”
FINRA oversees some 4,560 brokerage firms. Ketchum says that the SRO would set up a separate affiliate that would supervise investment advisers, who would not be subject to the same rules as broker-dealers. He stressed the needs for more examinations to discourage securities fraud and check on compliance as two of the reasons why FINRA should become the regulatory agency over investment advisers.
Per a Securities and Exchange Commission study mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the agency’s Office of Compliance Inspections and Examinations only examines about 9% of the investment adviser industry each year. On average, an adviser is examined by the SEC once every 11 years. The study offered recommendations:
• The creation of a new SRO for investment advisers
• Giving FINRA jurisdiction over investment advisers • Using user fees to fund the SEC’s exam program
Many investment advisers do not want FINRA to become their SRO and are pushing for lawmakers to increase SEC funding. Also opposing FINRA as the advisers’ SRO is the Investment Adviser Association, which alleges lack of accountability, transparency, and a bias toward the broker-dealer model.
Our investment fraud lawyers represent clients that have suffered financial losses because of investment adviser misconduct.
Related Web Resources:
FINRA: We Understand Investment Advisers, OnWallStreet, March 27, 2011
FINRA, if Empowered to Regulate Advisers, Will Tailor Oversight to Industry, Chair Says, BNA Broker/Dealer Compliance Report, March 30, 2011
FINRA
More Blog Posts:
SEC Needs to Keep a Closer Eye on FINRA, Says Report, Stockbroker Fraud Blog, March 15, 2011
SROs Immune from Broker-Dealer’s Lawsuit Over Bylaw Changes Related to Creation of FINRA, Says Appeals Court, Stockbroker Fraud Blog, March 7, 2011
FINRA Investigating Whether Broker-Dealers Providing Adequate Risk Controls to High-Frequency Traders, Stockbroker Fraud Blog, September 19, 2010
FINRA CEO Ketchum’s Speech, FINRA, March 22, 2011
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