Summarizing The Current Position Of Stakeholders In Decision On Naming FINRA To Oversee RIAs

Sunday, June 23, 2013 15:16
Summarizing The Current Position Of Stakeholders In Decision On Naming FINRA To Oversee RIAs

Tags: Dodd-Frank | fiduciaries | FINRA

As Congress and the SEC near a time for reckoning on implementing Dodd-Frank reforms in the regulation of investment advisers, Wall Street, RIAs, FINRA, and other stakeholders are digging in their heels and readying for a Washington, D.C. showdown. 


With that dramatic backdrop, Mark Schoeff wrote a solid piece of reporting in today’s Investment News profiling FINRA. Schoeff provides a balanced appraisal of the self-regulatory-organization (SRO) landscape in the financial services industry.


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Schoeff quotes Tamar Frankel, an esteemed securities law professor at Boston University School of Law, attacking FINRA’s credibility as a regulator. “It (FINRA) is built on its membership,” Frankel is quoted as saying. “Whenever brokers really care [about an issue], and FINRA goes against them, they will trump FINRA.”
FINRA's executive vice president of regulatory operations,, Susan Axelrod, responds to Frankel’s highly disparaging remarks saying, “We can be informed by the industry, but in no way are we instructed by them.”
That's great reporting and it really lays out the different players and their positions succinctly.
Schoeff shows how the 2007 merger of FINRA with the New York Stock Exchange was the beginning of a push to create an SRO that would oversee all financial advisors. Then, David Tittsworth of the Investment Advisers Association is quoted saying the merger “has created a large organization that is intent on growing further and extending its jurisdiction to investment advisers.”
This is a great piece of reporting that summarizes the current position of FINRA on overseeing investment advisers.
When you read a story like this, it makes you understand why FINRA remains likely to ultimately be named as the SRO overseeing RIAs.
I’m not saying FINRA should get the responsibility for regulating RIAs, but it is a convenient solution and it does have the bureaucratic heft to do it. Also, I’m so jaded, I believe Congress gets bought and won’t ever shut down Wall Street’s sales machine—even in the unlikely event a Congressman actually understands the issues well enough to know why it would be bad for consumers and retirees for FINRA to be chosen as  the SRO of RIAs.
Wall Street remains incredibly powerful despite its prominent role in causing the financial crisis, and nothing much has been done to reform the investment advice business since the financial crisis.
That part was not in Schoeff’s story. He’s doing straight reporting. But I’d love to hear what he thinks.

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