In new regulatory regime, Finra and SEC will work together, study predicts

Reform could also entail 10% to 20% more in compliance costs for RIAs, Tower Group projects

May 15, 2009 @ 3:39 pm

By Sue Asci

The Financial Industry Regulatory Authority Inc. will likely take a more active role in the examination of registered investment advisers as a result of regulatory reform, the Tower Group Inc. concluded in a study to be released Monday.

In fact, the Needham, Mass.-based financial research and consulting firm is expected to say that in a “best-case scenario,” Finra, the Washington and New York-based policing agency for the securities industry, would be given the responsibility of examining advisers while the Securities and Exchange Commission would have oversight.

A draft of the study, entitled “Broker vs. Adviser Regulation: It's the Principle of the Thing,” also concluded that any new regulatory reform could add 10% to 20% to compliance costs for RIAs and would have the greatest impact on the firms with the least assets under management.

Broker-dealers are better positioned than RIAs to respond to regulatory change, the report said.

RIAs will have to increase their compliance and reporting activities, the Tower Group noted.

This could create opportunities for larger platform providers to enhance compliance outsourcing offerings, the report said.

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