Finra chief: Proposed oversight commission could cause cracks in system

The Obama administration’s consideration of a safety commission for financial products needs to be approached with great care, Richard Ketchum, chief executive of the Financial Industry Regulatory Authority Inc., said today at NAVA’s annual legislative and regulatory conference. “It makes sense in mortgage financing, where there has been little focus on consumer protections,” he said during a keynote speech. “But in areas like securities regulation, where there are detailed [Securities and Exchange Commission], Finra and state rules and an infrastructure in place, there’s a huge risk in creating another entity that crosses over it.” A new agency could be duplicative and create new regulatory cracks, Mr. Ketchum said. Rather, something more limited, such as a statutory instruction across regulatory systems, such as banking and insurance, would be a better solution, he said. New regulations would have to encourage regulatory regimes to work together in order to eliminate gaps, Mr. Ketchum said. He pointed to the annuities sector as an area that is rife with regulatory gaps, saying that New York- and Washington-based Finra keeps the reins tight on variable annuities by requiring licensing exams, reviewing sales materials and requiring registered principals to approve VA purchases. But that isn’t the case in the fixed-annuity sector, Mr. Ketchum said. “Consumer protection depends on state regulations. In many states, you get detailed information on fees, but in some states, you may not,” Mr. Ketchum said. “Finra is ready to do our part to advance regulatory consistency,” he said. “We have reached out to state commissioners to engage in dialogue to ensure consistent regulatory requirements across all products.” NAVA, the variable annuity trade association, is based in Reston, Va.