Finra survey shows investors want more regulatory protection

They're willing to pay a little extra for it, too

Nov 7, 2014 @ 1:04 pm

By Mark Schoeff Jr.

+ Zoom
(Bloomberg News)

Investors want more regulatory protection and are willing to pay higher brokerage costs to get it, a new Finra survey shows.

On Thursday, the Financial Industry Regulatory Authority Inc., the industry-funded broker-dealer regulator, released a study showing that 92% of investors say it's important to have a “cop on the beat” to protect them from malfeasance in the markets and that 74% support “additional regulatory protections."

More than half (56%) would favor enhanced regulation even if it resulted in “a minimal increase" in costs that brokerage firms pass on to investors. The rest of the study participants split between opposing additional regulation if it meant higher costs (22%) and having no opinion (22%).

The survey appears just weeks before the Dec. 1 deadline for comments on a proposal to implement a customer data collection initiative, the Comprehensive Automated Risk Data System.

Finra has made CARDS a priority since it first proposed the idea in a December 2013 concept release. The regulator argues that the system would let it collect reams of brokerage account information quickly and efficiently, bolstering its ability to detect investment product sales abuses and other harmful market trends.

Critics worry that the cost of CARDS — in technology infrastructure, maintenance and security — would be burdensome for small broker-dealers. It has drawn opposition from Capitol Hill. Finra is conducting a cost-benefit analysis of the CARDS proposal.

Although the results of the study could help make the case for CARDS, that's not the reason Finra conducted it, said George Smaragdis, a Finra spokesman.

“While Finra has previously surveyed investors regarding 'investor literacy' — the understanding ordinary investors have of market principles, instruments, organizations and regulation — we felt it was important to survey investors regarding their attitudes about regulatory protections,” Mr. Smaragdis wrote in an email.

The study was based on an online survey of 1,000 people conducted in October. Participants had to be 21 or older, make household financial decisions and have at least $10,000 in investible assets, although 70% had more than $100,000 in investments.


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