Tom Bradley of TD Ameritrade Suggests FINRA Trial Exams for Dually Registered

As the signs abound in Washington that new legislation on an SRO for advisors may soon be floated, Tom Bradley has another suggestion: institute a trial period under which FINRA would conduct exams of dually registered advisors, under the strict oversight of the SEC.

“The SEC should absolutely continue to examine and oversee pure fee-based RIAs,” said Bradley, president of TD Ameritrade Institutional, in an interview with AdvisorOne on Thursday, indicating the steps he suggested should take place immediately to address the issue of better oversight of advisors, “but there has to be a strong focus on improving the qualifications of the examiners.”

In addition, he called on the SEC to make RIA exams more consistent and to improve the training of its examiners. He then suggested that “a second thing to immediately explore and start on a trial basis” is to have FINRA examine dually registered firms. “This is what the dually registered folks say to me: if FINRA is already examining me, let’s do the whole thing at once,” arguing that it would be more efficient and also provide the benefit of better investor protection. As for those RIAs regulated by the states, Bradley said that the issues needed to be “explored” with the input of NASAA and the states.

On the issue of a fiduciary standard, Bradley reiterated his long-held and often–stated position. “I’ve always said this: if a person is providing ongoing fee-based advice they should be held to a fiduciary standard. Harmonization is not the answer when you’re talking about a sales process rather than an advice process; we must be careful about harmonizing rules that cover the sales process. I don’t see how you can harmonize that.” For those ‘advisors’ who operate now under the “sales laws but who provide advice for a fee,” he argued, “they should be moved under the law created for that—the Investment Advisers Act of 1940.”

Bradley was quick not to disparage the role of such salespersons in the broader U.S. economic system. “In this country we distribute capital through the sales process for new issues and secondaries,” he pointed out, but “people have to realize they’re dealing with a salesperson—we need clarity around that. The average person doesn’t understand the difference,” he said, between a salesperson and a fiduciary.