Finra boss calls for fiduciary standard for all advisers

But Finra does not want to significantly alter suitability rules that B-Ds now follow

May 13, 2009 @ 1:27 pm

By Sara Hansard

For the first time, Finra chief Richard Ketchum called for adopting fiduciary standard for all advisers.

“We ought to move to a single standard, and I think it makes sense for it to be a fiduciary standard,” he said in an interview today.

Mr. Ketchum is chairman and chief executive of the Financial Industry Regulatory Authority Inc. of New York and Washington.

He and other Finra officials have called for bringing investment advisers under a self-regulatory organization in order to leverage the ability of the Securities and Exchange Commission to supervise advisory firms.

They have suggested that Finra would be the best SRO to oversee advisers since it already examines and regulates broker-dealers.

“A single standard makes sense for persons that are engaged in very similar activities. To the extent a broker-dealer is providing broad-based advice similar to what an investment adviser is doing, we would love to get to a single standard,” Mr. Ketchum said. However, he indicated that Finra does not want to alter significantly suitability rules that broker-dealers are obliged to follow.

“Suitability provides a level of specificity and value over and above a fiduciary standard,” Mr. Ketchum said.

Few enforcement cases appear to have been brought based on violation of fiduciary standards, he said. More enforcement cases are made because of unsuitable recommendations made by brokers to clients.

Changes in Finra’s governing structure would have to be made to accommodate the more than 11,000 investment advisory firms that are regulated by the SEC, Mr. Ketchum said.

“We think strongly that we need a solution that ensures that the investment advisory community has proper governance over that function,” he said.

Finra officials are “open-minded” about how that could be accomplished, Mr. Ketchum said.

Members could be added to Finra's current board who have advisory backgrounds, or a separate "mirror board," could be created that would represent investment advisers, he suggested.

In addition, Finra would need to add investment advisory expertise to its staff to oversee the advisory industry, Mr. Ketchum said.

He called for a dialogue with investment advisory industry representatives to discuss the possibility of Finra’s serving as the SRO for advisory firms.


What do you think?

View comments

Recommended for you

Featured video


These are the federal and state rules that will most impact 401(k) advisers

Will Hansen, chief governmental affairs officer for the National Association of Plan Advisors, discusses regulation and legislation poised to have the biggest impact on advisers.

Latest news & opinion

IBD report: Another impressive year

Despite a stock market decline, revenue is up. And the streak isn't expected to end anytime soon.

IBDs with the most CFPs

How many of the more than 83,000 certified financial planners are employed by the big independent broker-dealers?

Richard Thaler wants to use 401(k)s to boost Social Security payments

The Nobel laureate wants to simplify drawing down retirement assets, which he thinks is 'way harder' than saving the money.

InvestmentNews announces 2019 Innovation Awards winners

Sheryl Garrett is this year's InvestmentNews Icon.

Morgan Stanley rides wealth management train to solid first quarter

Chairman and CEO James Gorman expresses excitement about expanding into workplace plans with purchase of Solium.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print