The exam brings the SROIIA a little bit closer to acting as a self-regulatory organization over investment advisers. But will the SEC approve?
The Self-Regulatory Organization for Independent Investment Advisers today teamed with Fi360 to pave the way for a fiduciary exam that it will administer to advisers who want to register with the organization.
The exam brings the SROIIA a little bit closer to acting as a self-regulatory organization over investment advisers. The group is waiting to see whether the Securities and Exchange Commission will approve an SRO specifically for advisers.
The SROIIA was established in April by a group of students from the University of Mississippi law school and the Business Law Society. Fiduciary360 LP, which is known as Fi360, is the organization behind the Accredited Investment Fiduciary and the Accredited Investment Fiduciary Analyst designations and a series of fiduciary training programs.
A report by the Securities and Exchange Commission, mandated by Dodd-Frank, has indicated that an SRO for financial advisers is among the ways to improve oversight over advisers.
However, advisers — and the Business Law Society — believe that the Financial Industry Regulatory Authority Inc. isn't necessarily the best SRO to handle that oversight, especially considering that Finra holds brokers to a “suitability” standard while advisers adhere to a fiduciary standard.
The test and a newly launched website have been SROIIA's focal points over the last three months, said D. Tyler Roberts, a member of the Business Law Society and co-CEO of SROIIA. The group has also been performing internal research and working on SROIIA's governance policies, he added.
“We feel like we should proceed with writing the exam and the regulations in case [the SEC] says they will do it,” Mr. Roberts said. “We'd like to get in front of the SEC when they have a hearing.”
For now, SROIIA will reach out to advisers to ask them for input on the standards SROIIA will use.
There is no exact date when the exam is expected to be ready, and no sample questions are ready to be shared with the public, said Timothy Collins, co-CEO of SROIIA. He noted that there would be multiple-choice questions and depictions of scenarios to test applicants' ability to recognize when fiduciary duty comes into play.
Nancy Condon, spokeswoman for Finra, declined to comment. Calls to the SEC went unanswered (government offices in Washington, D.C., were evacuated after the Virginia earthquake this afternoon).
