Finra defends its authority over B-D's dispensing financial advice

Aug 19, 2009 @ 3:26 pm

By Sara Hansard

The Financial Industry Regulatory Authority Inc. isn't backing down from its position that it has authority over broker-dealers' financial planning activities.

Finra executive vice president Tom Selman maintained today it was entirely within Finra's authority to take action against Ameritas Investment Corp., a dually registered broker-dealer and investment adviser based in Lincoln, Neb., and one of its registered representatives, for advertising and sales violations involving misleading financial plans.

“Ameritas is a case in which clearly Finra has jurisdiction because Ameritas is a broker-dealer, [the rep] was acting as a broker-dealer, she was selling securities products, and they were all doing this through the broker-dealer business,” he said. “The jurisdiction of Finra is clear.”

The Financial Planning Association yesterday urged the Securities and Exchange Commission to restrict Finra's enforcement power.

In a letter to SEC Chairman Mary Schapiro, the FPA urged the commission to clarify and restrict the scope of the self-regulatory body's authority.

“Due to Finra's absence of legal authority to regulate broad financial planning activities, and to its inability to impose a fiduciary standard that would enhance investor protection, we believe this task is best carried out by the SEC,” FPA president Richard Salmen wrote.

Mr. Salmen is also a senior vice president at GTrust Financial Partners of Topeka, Kan., which manages $400 million.

On Aug. 6, Finra fined Ameritas $100,000 for not supervising a broker who persuaded customers to take on additional mortgage and home equity debt to buy variable universal life insurance policies that were to be used to fund college expenses and retirement.

For the complete report, see the Aug. 24 issue of InvestmentNews.


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