SEC's Walters Backs Harmonizing B/D, Advisor Rules

Yet another top official at the SEC is championing the idea of harmonizing rules for investment advisors and broker/dealers. In a speech before the Mutual Fund Directors Forum Ninth Annual Policy Conference May 5, SEC Commissioner Elisse Walter threw her support behind a legislative remedy. “I believe that regulation of a financial professional should depend on what she does, not what she calls herself or how she is paid,” Walter said. “As a corollary, I also believe strongly that retail investors should not bear the burden of understanding distinctions between financial professionals that have become increasingly less relevant over the years. These opaque distinctions frequently lead to investor confusion and arguments about definitions that simply should not matter. This reasoning, I believe, leads to the fundamental principle that should guide our review of how to regulate financial professionals for the protection of the investing public: Investors should receive the same level of protection when they purchase comparable products and services, regardless of the financial professional involved.”

Walter–a former top official at both FINRA and the CFTC–said that to harmonize the regulation of broker/dealers and investment advisors “fully, legislative action appears to be necessary.” She laid out four areas for Congress to consider in “vetting enabling legislation and by the Commission in implementing that law.”

Registration Process. Currently, she said, there are different processes and different forms for broker/dealers and investment advisor registration. There should be a unitary system for registration. Every financial professional should be required to provide the information appropriate to the services and products he provides, in other words, his functions. There should also be a vetting process in which a new registrant would be required to demonstrate that he has the operational capacity to carry on its proposed business.