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Regulation and Compliance > Federal Regulation > FINRA

FINRA Alternative: SROIIA Surveying RIA Firms

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FINRA, the self-regulator for broker-dealers (BDs) has said it wants to regulate RIAs as well, particularly because the majority of RIAs are part of BDs—the “dually registered” BD-RIAs. That’s a concern for FINRA because currently they regulate the BD side and not the RIA side of the “house.”

One issue is that activities on the RIA side of the dual registrants could fall through the cracks, as it is widely acknowledged that the SEC does not have enough funding to examine the activities of RIA firms as often as FINRA examines BDs. The SEC Study on Enhancing Investment Adviser Examinations said that currently it has the resources to routinely examine RIA firms—those that are not deemed high risk—every 11 years.

Many RIAs, particularly among the 35,000 independent RIA firms that are not affiliated with BDs, would rather see a properly funded the SEC provide RIA oversight—and they acknowledge that would mean regular exams.

In the AdvisorOne Top Wealth Managers Quarterly Pulse survey, fielded in February-March 2011, we asked independent RIA firms to consider the SEC’s three recommendations, which were:

  1. “Authorize the Commission to impose user fees on SEC-registered investment advisers to fund their examinations by OCIE;
  2. Authorize one or more SROs to examine, subject to SEC oversight, all SEC-registered investment advisers; or
  3. Authorize FINRA to examine dual registrants for compliance with the Advisers Act.”

Of the 162 independent RIAs participating in the AdvisorOne Top Wealth Managers Quarterly Pulse Survey, 40% preferred the first option—SEC OCIE Examinations funded by user fees; 30% preferred the second option, authorizing “one or more SROs to examine…all SEC-registered” RIAs; and 28% preferred that dual-registrants be subject to FINRA examinations “for compliance with the” Investment Advisers Act of 1940.


Mercer BullardOther than FINRA, one other organization has announced that it wants to be authorized as an SRO for RIAs: the Self-Regulatory Organization for Independent Investment Advisers (SROIIA), announced last month by law students of investor advocate and University of Mississippi School of Law Professor Mercer Bullard (left). The Committee for the Fiduciary Standard on Monday announced its support for SROIIA, if the SEC does not get the necessary funding to continue to regulate RIAs. This editor is a member of the Committee.

SROIIA responded to the Committee’s support by announcing its progress in its own release, saying that SRIOIIA “will demand a bona-fide fiduciary standard and will accept nothing less.” The organization has incorporated and filed for not-for-profit status, Co-CEO D. Tyler Roberts told AdvisorOne on Wednesday.

Currently Surveying RIAs

SROIIA is surveying investment advisors about “what they would like in an SRO,objections to joining,” Co-CEO Timothy Collins told AdvisorOne on Wednesday. SROIIA has several hundred completed surveys and the work continues, he said. They are aiming for 1,000 RIAs to complete the short surveys by summer, he says. Law students Tyler Montell, University of Louisville School of Law, and Adam Hynick, Stetson University School of Law are leading the survey efforts.

“We appreciate the support that we have been shown by the adviser community in conducting our surveys,” Roberts stated in the release.

In addition, the group announced corporate officers: Joseph Shayeb, CFO; Robert Oliveri, chief administrative officer; and Laura Collins, Secretary. All are law students at the University of Mississippi School of Law.


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