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September 12, 2011 at 08:00 PM
WASHINGTON BUREAU — Rep. Spencer Bachus is getting mixed reactions to a draft bill that would authorize one or more self-regulatory organizations (SROs) to oversee investment advisors that are registered with the U.S. Securities and Exchange Commission (SEC).
Bachus, R-Ala., is calling for the Financial Industry Regulatory Authority (FINRA), Washington, or another SRO to improve the registered investment advisor (RIA) examination process.
Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act has directed the SEC to look into applying the same fiduciary standard of care that now applies to investment advisors to broker-dealers and their representatives; Dodd-Frank Section 914 calls for the SEC to look into RIA oversight.
Terry Headley, president of the National Association of Insurance and Financial Advisors (NAIFA), Falls Church, Va., and Ken Ehinger, a board member at the Association for Advanced Life Underwriting (AALU), Reston, Va., said today at a hearing organized by the House Financial Services Committee capital markets subcommittee that the SEC should focus more on Section 914 and less on Section 913.
Ehinger testified on behalf of AALU that, instead of focusing on the fiduciary standard issue, the SEC should “give further attention to problems acknowledged by the Section 914 study of the lack of an effective inspection cycle for many investment advisors.”
“As the SEC is aware, some of the most dramatic failures in recent years on the retail brokerage-advisor side were not a result of the lack of rules governing financial professionals or the lack of a fiduciary duty of malefactors, but a failure of regulatory oversight,” Ehinger said.
Headley told the subcommittee that virtually all NAIFA members who are RIAs are already subject to comprehensive FINRA broker-dealer regulations as well.
