Advisors Prefer RIA Oversight by SEC

(3) Authorize FINRA to examine dual registrants for compliance with the Advisers Act.”  

More than 40% of Top Wealth Managersparticipating in the Q4 survey would prefer to pay a fee to the SEC to have OCIE examine RIA firms.

Just over 31% of those participating in the survey said they would rather have “one or more SROs,” to oversee RIA regulation.

Finally, over 28% said they would rather see Congress “Authorize FINRA to examine dual registrants—BD-RIAs.

FINRA, the BD self-regulator, has stepped up to say it would like regulate all RIA firms, not only BDs and not just dually-registered BD-RIAs, and there is logic in why FINRA would want oversight of an entire firm if it is dually registered.

It is important to point out that having FINRA oversee all independent RIAs was not one of the SEC staff’s recommendations to Congress. Rather, they recommended that FINRA oversee the dual registrant BD-RIAs.

So far, however, there is only one other group that has stepped forward to ask for authorization to be an SRO for independent RIAs, and that is SROIIA, the Self-Regulatory Organization for Independent Investment Advisors. That’s the fledgling group led by a group of law students of University of Mississippi School of Law Professor and investor advocate Mercer Bullard.

It remains to be seen whether Congress will appropriate enough funding for the SEC to truly live up to its mandate as an investor protection organization—funding which the SEC earns through fees from financial industry participants, not from taxes, and out of which, in some years the Congress withholds hundreds of millions of dollars that could be going to fund programs that would, as advisors of all stripes indicated they believe, help to restore investor confidence.

For an overview on the debate about extending the fiduciary standard, please see “Politics and Process: SEC and the Fiduciary Study—Slideshow.”