More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Michael Oxley should be on every advisor's radar. The former Republican congressman from Ohio who served as chairman of the House Financial Services Committee and co-authored the Sarbanes-Oxley Act of 2002 following the Enron scandal, registered as a lobbyist in February with the Financial Industry Regulatory Authority (FINRA) to help convince Congress that FINRA should be the self-regulatory organization (SRO) for advisors.
Oxley’s registration form as a lobbyist for FINRA also states that current and anticipated issues he will focus on is the regulation of securities and markets as well as “harmonization of regulation of broker-dealers and investment advisers.” The harmonization of advisor and broker rules is the contentious issue that is intertwined with the Securities and Exchange Commission’s (SEC) attempts to write a rule to put brokers under the same fiduciary standard as advisors.
Oxley (left), who’s now with the law firm Baker Hostetler in Washington after serving in Congress from 1981 to 2007, spoke with AdvisorOne's Washington Bureau Chief Melanie Waddell on Wednesday about his role in lobbying on behalf of FINRA, and whether he thinks the SEC will see a further funding boost.
Melanie Waddell: As you know, advisors are concerned about FINRA having oversight of them. Can you explain what your role will be as you lobby on behalf of FINRA?
Michael Oxley: Part of my role is educational. We hope to not only educate the members but the public in general about what was mandated in the [Dodd-Frank] Act and what comes next.
Waddell: When you say what was mandated in the Act, what are you referring to specifically?
Oxley: I think for the first time you really had direct mention of investment advisors [in Dodd-Frank] and how to go about their registration and regulation. So a lot of this is new [to those on Capitol Hill] and I think there is a lot of information we need to get out about the capabilities of FINRA … and whether the SEC will have the necessary resources to carry out [oversight of advisors]. We hope to have some allies in that area to help us deliver that message.
Waddell: Who would those allies be?
Oxley: I’m not at liberty to say right now.
Waddell: Are you actively going to Capitol Hill now to lobby on behalf of FINRA?
Oxley: We haven’t yet. I haven’t been up to the Hill on that issue.
Waddell: When do you think you will?
Oxley: We have a lot of organizational issues to take care of first.
Waddell: The Securities and Exchange Commission received a $74 million budget boost under the compromise continuing resolution (CR) that Congress passed a couple weeks ago. Do you see the need for the SEC to have more funds to deal with implementing Dodd-Frank?
Oxley: Yes, I think so, but I think that’s as good as the SEC is going to get.
Waddell: You don’t expect the SEC to receive more funding under the FY2012 budget?
Oxley: Not really. No.
Waddell: Advisors have fears about FINRA having oversight of them. How would you settle some of those fears?
Oxley: Part of it is education. Rick Ketchum [CEO of FINRA] and the folks at FINRA, I’ve worked with for years and I have great admiration for their abilities. The stark fact is that the alternatives that the SEC sent back to Congress [in the Section 914 study regarding the need for a self-regulatory organization (SRO) for advisors] as far as increasing the SEC’s budget dramatically to include [more money to oversee] investment advisors, that’s just not going to happen; the second option was to increase the [user] fees dramatically, and that’s not going to happen in this Congress. So the alternative is an SRO and FINRA is the SRO to go to.
Waddell: FINRA would have to put an infrastructure in place to handle taking on oversight of more advisors, beyond the dually registered advisors it currently oversees.
Oxley: I think FINRA is head and shoulders above anybody else [in terms of an SRO option]. But obviously, part of the process moving forward is to present the case on how [FINRA] can handle that responsibility.
Waddell: How long do you think it would take for FINRA to put an infrastructure in place?
Oxley: You’d have to ask the folks at FINRA.
Waddell: How do you feel about how Dodd-Frank implementation is progressing, and Dodd-Frank in general?
I think it was a necessary response to an incredibly bad situation. Just like Sarbanes-Oxley, I would have written [Dodd-Frank] differently.