The debate in Washington, D.C. over implementation of the Dodd-Frank Act has taken a bizarre new twist recently. First, last month two law students at the University of Mississippi affiliated with Mercer Bullard announced that they had formed an SRO for RIAs, aptly named the Self-Regulatory Organization for Independent Investment Advisors. Then, Monday, The Committee for the Fiduciary Standard issued a release in support of SROIIA as the SRO for RIAs, but only if the SEC doesn’t continue in its role as regulator of investment advisors, with additional funding from Congress.
The impetus for both these moves seems to be a prevailing sense in Washington that a new SRO for RIAs is in the cards, now that the Republican controlled House appears disinclined to increase funding for the SEC. The front-runner for that job is, of course, FINRA, which with the securities industry support has been angling to absorb RIA regulation since it realized over 15 years ago that it couldn’t stomp out the evolution of independent, fee-only fiduciary advice.
Although I firmly believe that independent advice is the future, it’s a disappointing commentary that after more than 40 years, the independent advisory world is still so fledgling and disorganized that its best hope of preventing a FINRA takeover is a couple of ‘Ole Miss students. What do you think the chances are that when it comes time to designate an RIA SRO, Congress and the SEC will side with the kids in Oxford rather than FINRA? To my mind, slim would be wildly optimistic.