More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
This is an extended version of the profile that appeared in the May issue of Investment Advisor, part of AdvisorOne's Special Report profiling this year's members of the IA 25, the most influential people in and around the advisor universe. See the complete list and Special Report schedule for extended profiles of all the 2011 members of the IA 25.
Will it be FINRA, the SEC, the DOL or someone else?
By “it” we mean the financial service industry’s sole self regulatory organization. Or will it be a combination of multiple organizations?
As one can tell, questions over who will have oversight of what (when all is said and done) are everywhere at the moment, and Richard “Rick” Ketchum is in the thick of them. Ketchum, left, chairman and CEO of the Financial Industry Regulatory Authority, is being praised by industry leaders—most notably FSI chief Dale Brown—for the forthright manner with which he’s trying to get answers.
“We don’t think a requirement exists that there should only be one industry SRO,” Ketchum says. “Any group of professionals should be able to get together and form an SRO if they want to. That said, we feel FINRA is suited to the role because we have the experience overseeing broker-dealers and their affiliated reps. We have the infrastructure, capability and an understanding of the wide range of business models that exist in this area of the industry.”
However, Ketchum rushes to emphasize that differences can exist between the needs of broker-dealers and the needs of representatives and advisors, noting, for instance, that a broker-dealer might have an investment bank area of interest, where an advisor will not.
“We understand that each has different needs,” he says. “In that instance we recognize the SEC as the primary rule maker and we would bring in people and resources that have the experience and understanding of the reps’ side of the business.”
If FINRA does eventually get the SRO call, Ketchum’s industry and regulatory experience certainly would have been a factor, as his resume illustrates.
Prior to becoming CEO of FINRA, Ketchum was CEO of NYSE Regulation from March 2006 to March 2009. He served as the first chief regulatory officer of the New York Stock Exchange, a position he began in March 2004. From June 2003 to March 2004, Ketchum was General Counsel of the Corporate and Investment Bank of Citigroup Inc., and a member of the unit's planning group, Business Practices Committee and Risk Management Committee.
Previously, he spent 12 years at NASD and The NASDAQ Stock Market Inc., where he served as president of both organizations.
Prior to working at NASD and NASDAQ, Ketchum was at the Securities and Exchange Commission (SEC) for 14 years, with eight of those years as director of the division of market regulation.
In October 2010, he was appointed by President Obama to serve on the President's Advisory Council on Financial Capability—a group established to promote and enhance financial literacy and capability among Americans. He also serves on the Joint Advisory Committee on Emerging Regulatory Issues, a committee created by the SEC and CFTC to review emerging regulatory issues, starting with the market events coming out of the May 2010 so-called "flash crash."
“One of our major initiatives,” he says, “in addition to working with the SEC on appropriate disclosure should the fiduciary standard be implemented and revamping our examination program to reflect the risk-based environment in which we find ourselves, is in working with the SEC on the issue of high-frequency trading. We want to ensure there is a consolidated audit trail to identify potentially manipulative behavior on the markets so something like the flash crash wouldn’t happen again.”
With his level of experience, and the initiatives the organization has carved out, does anyone still wonder why he made this year’s IA 25?
Read more about the rest of the IA 25.
Don't see someone on this year's IA 25 that you think belongs there? Submit their name and your justification for why they should be considered among the most influential people in and around the advisor universe in the Comments field below. We promise to consider reader nominations, but please, no ad hominem attacks on those who were named in this or past years.--Ed.