The Debate Continues

We’re still a few months away from learning the results of the Dodd-Frank Wall Street Reform and Consumer Protection Act SEC study but the debate rages on. Recently the Securities Industry and Financial Markets Association issued “Standard of Care Harmonization, Impact Assessment for SEC,” an impact assessment study “…designed in response to the SEC request for comment on the upcoming study of the standard of care obligations for broker-dealer and investment advisors.” No surprise, the study was not a hit with some of the proponents of a strong fiduciary standard. Barbara Roper, director of investment protection at the Consumer Federation of America said, “The entire study is a complete and total waste.”

On a related issue, the debate continues over who will ultimately oversee investment advisors. For anyone following this issue, it will be no surprise that FINRA has indicated a strong interest in assuming that role. In a comment letter recently posted on the SEC web site, Richard Ketchum, FINRA CEO laid out specifics on how that organization would approach the responsibility. The details included:

  • Creation of a new and separate affiliate with its own board.
  • A majority of public members
  • A staff and enforcement arm independent of current FINRA operations
  • Some rulemaking authority but “FINRA does not believe that it would be appropriate…to impose a broker dealer like regulatory regime on investment advisors.”
  • A dramatic increase in the frequency of examinations

Among other organizations, the Investment Advisor Association, Investment Company Institute and Managed Funds Association oppose the concept of a FINRA SRO for advisors.

Keep watching, we’ll find out the results early next year.

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