FPA questions Finra B-D supervision rule

A proposal by the Financial Industry Regulatory Authority Inc. could require brokerage firms to supervise entities unrelated to securities, the Financial Planning Association said in a comment letter to Finra filed Friday. “We are very concerned about maintaining a clear separation of functional regulation under the federal securities laws between broker-dealers and financial planning, investment advisory and other activities subject to the Investment Advisers Act of 1940,” wrote Dan Barry, director of government relations in the Washington office of Denver-based FPA. The comment letter pertained to Finra’s proposed broker-dealer supervision rule consolidating old NASD and New York Stock Exchange rules. he regulatory bodies of both groups merged last year. Finra’s proposal may exceed the New York- and Washington-based self-regulatory organization’s statutory authority, Mr. Barry suggested in the letter. The rule proposal, issued in May, is a “broad expansion” of the existing NASD rule that requires a brokerage principal to supervise business activities for which registration as a broker-dealer is required, and it could lead to conflicts because brokers are regulated differently than are investment advisory firms, the letter said. “Finra is proposing a rule that would add to this confusion and conflict between higher and lower standards of accountability to the investor,” it said. “On what basis is a [broker-dealer] qualified to supervise, and presumably thereby direct, non-securities business?” the letter asked. “We ask if it would be appropriate for the SEC to promulgate a rule under the Advisers Act requiring [registered investment advisory firms] to supervise the brokerage activities of an affiliated B-D?” the letter said.