The Investment Advisers Oversight Act, sponsored by Financial Services Committee Chairman
The push for the bill comes out of the consensus recognition that the
But if the problem is widely understood, the solution is anything but noncontroversial.
"I would first like to fully fund the
Frank cited the recent hit that financial giant JP Morgan took from risky trades that had gone sour. The
It was the
Echoing Frank's concerns about the SRO approach,
That approach is supported by certain industry groups, including the
But some supporters of the Bachus bill argue that strengthening the role of the
"We have no illusions that FINRA is a perfect regulator. Some of the criticism it is receiving is valid," FSI President and CEO
With dual-registrations on the rise and the lines blurring between the broker-dealer and adviser professions, Brown noted that FINRA, for all its shortcomings, is the most appropriate organization to take on the role of overseeing RIAs.
"It would create a lot more consistency having one regulator looking at both sides of the business," Brown said, making a point to characterize FINRA as an "independent industry regulator" rather than an SRO, noting that the majority of the organization's board is comprised of non-industry members.
But the Bachus proposal has also drawn sharp opposition from state regulators, who see in FINRA an additional layer of regulation that would adversely affect smaller investment firms currently regulated by the states, many of whom might close up shop if they were forced to pay membership fees to FINRA or another SRO, according to
The bill "would require firms already well regulated by the states to become members of a self-regulatory organization," said Morgan, who cited a high rate of adviser examinations reported by state authorities. "That is not necessary. There is no regulatory gap there."
Morgan indicated that his group would not oppose the bill if language concerning state-regulated advisers were dropped.
"State regulators have done an exceptional job," Bachus said, noting that his bill is actually projected to expand the oversight role of the states, bringing an estimated 7,000 more advisers under the purview of authorities at that level, though they would still be required to register with the SRO. "We want to be very sensitive to the state regulators," Bachus said, adding that he expects his committee to consider an array of amendments when the bill comes up for a markup.
While his group is advocating for user fees assessed to advisers to fund
|Copyright:||(c) 2012 Financial Planning. All rights Reserved.|
|Source:||Source Media, Inc.|