FINRA Endorses Congressional SRO Bill As "Exactly" The Right Direction

Thursday, October 06, 2011 07:44
FINRA Endorses Congressional SRO Bill As

Draft legislation currently circulating around the House Financial Services Committee is more or less exactly what FINRA is looking for on the topic of RIA oversight.

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FINRA's regulatory chief Stephen Luparello says the bill, which would hand RIA supervision to a self-regulatory organization like his, is "directionally exactly what we want."


Luparello endorsed the bill at a Washington conference held by pro-SRO group the Financial Services Institute.


However, the North American Securities Administrators Association has emerged as one of the most prominent critics of the idea that investment advisors need a FINRA-like regulatory structure.


At the same event, Jack Herstein, head of the state regulator group, called attempts to move RIA oversight an "overreaching" effort to sidestep the real issue of an underfunded SEC.


Luparello also repeated remarks we've been hearing out of FINRA for months: that he knows brokerage reps are different from SEC-registered advisors, that FINRA would have to change if it took over RIA oversight, that it would have to hire new people.


Whether reassurance that RIAs would not be squeezed into a brokerage framework is actually much comfort, FINRA definitely seems eager to expand its reach.


And the talking point that the SEC only examines 9% of RIAs a year seems to be getting some traction. Eleven years is too long in the public's perspective for any firm entrusted with their money to go without an audit.


Any non-SRO solution would have to involve stiffer regulation either way.




Stephen Luparello,



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