Understaffing at the Securities and Exchange Commission — and a wave of new responsibilities for the agency as part of the Dodd-Frank Act — make it more likely than ever that advisers will be overseen by the
Financial Industry Regulatory Authority Inc., industry officials said at the Financial Planning Association's annual conference in Denver.
“The resources at the SEC are completely inadequate and the answer being teed up is having Finra be the SRO for all advisers,” Barbara Roper, director of investor protection for the Consumer Federation of America, said during in a panel discussion yesterday about the Dodd-Frank law. Since Congress failed to approve a new budget by Oct. 1, the SEC is one of many federal agencies operating under its current budget.
Nancy Condon, a spokeswoman for Finra, declined to comment.
But attendees at the FPA conference said registered investment advisers would be outraged if they had to report of Finra instead of the SEC. “Advisers don't
trust Finra,” said Tom Bradley, president of TD Ameritrade Institutional. “Most advisers don't feel that Finra has the competency to cover [registered investment advisers].”
Some advisers said they felt that choosing between the SEC and Finra at this point in time was like choosing between the lesser of two evils. “The SEC is too regulatory-minded and they don't think in practicalities,” said J. Alan Favre, a vice president at CIM Securities LLC, which has $250 million in assets under management. “Finra, however, doesn't understand our business.”
(Get more of the inside scoop from the FPA conference directly from Denver.)
Specifically, advisers are concerned that Finra's rule-based approach won't be able to address the principle-based RIA business, said Daniel Barry, managing director for government relations and public policy at the FPA. “The SEC has been regulating advisers for 60 years,” he said. “They have the experience; it's just a matter of getting them the resources.”
