End Game

And finally, the Big Kahuna: Spencer Bachus (R-AL) wants to extend FINRA’s authority to all brokers who become investment advisors under the IPA, which is to say, virtually all 700,000+ of them. After all, FINRA is already regulating them as RRs. Who’s in a better position to do this job? And to sort out the thorny issues of when the fiduciary duty applies, and just how limited a product list a B/D can have (can you say proprietary?).

Ever notice in legal matters, how little, vague, and seemingly harmless words can come back to bite you on the keister? Words like, oh I don’t know, “harmonize?” Remember in the original Obama Administration white paper, the stated goals were to “create a fiduciary standard and harmonize legislation for financial advisors?” Most of us were so encouraged to find “fiduciary” in there, that we didn’t think too much about this “harmonization” thing. But there it is, in all its haunting glory, right in Rep. Bachus’s amendment.

So, what’s the end game, here? If all financial advisors–including brokers, financial planners, and RIAs–are to have a fiduciary duty to their clients, how are we going to have “harmonized” regulation? It’s a pretty good argument that having one regulator for all of them would lead to regulatory harmony. But who’s to regulate them? Well, if FINRA is already going to regulate 700,000 of them (under Bachus), and the vast majority of CFPs are already RRs under FINRA anyway, and many RIAs are, too, there’s really only one logical choice here. The wrong one, in my view, but the increasingly likely one. That is, unless someone else makes a surprisingly dynamic move here in the waning minutes. Unfortunately, I haven’t seen any Bobby Fishers playing on our side of the table.