Combatants Gear Up for SRO Hearing

Skip Schweiss, managing director of advisor advocacy and industry affairs at TD Ameritrade Institutional, says that while there is a “general acknowledgement” that exams of advisors “needs to improve, we think there are ways to do that different than another regulatory layer” via an SRO.

“Advisors should take the time and be heard on this issue” buy contacting their representatives, he said.

Senate Banking Committee chairman Tim Johnson, D-S.D., has expressed his lack of appetite for creating an advisor SRO, “but it’s impossible to speculate,” Schweiss said. Issues get attached to other pieces of legislation, and “who knows, next thing you know [an SRO for advisors] is law.”

Indeed, former SEC Chairman Harvey Pitt, who’s now CEO of Kalorama Partners in Washington, told AdvisorOne that “FINRA’s success or failure in becoming the regulator for advisors will depend on its ability to persuade Congress that having an existing infrastructure already in place, and having the resources to devote to expanding [its] internal assets” makes it the better choice than creating a new SRO from scratch.

Barbara Roper, director of investor protection for the Consumer Federation of America (CFA), told Bachus, Rep. Barney Frank, D-Mass., and other committee members on Monday that while she’s disappointed the hearing on Wednesday will focus on just the SRO option, not the other two options that have been proposed, user fees and funding the SEC, she is a “realist.” CFA, she said, is ”prepared to consider an SRO as a meaningful improvement over the status quo if that SRO is appropriately designed. After all, one of the advantages of an SRO is that it is not subject to the vagaries of the congressional appropriations process.”

Unfortunately, Roper continued, ”as currently drafted, H.R. 4624 does not meet the standard of an appropriately designed SRO.” She told committee members that “rather than moving forward with a bill that clearly fails to solve the issues it is intended to address, we urge the Committee to conduct an objective review of the available alternatives in order to arrive at an approach that increases the quality of oversight at a reasonable, and equitably shared, cost to the investment advisor community and their clients.”

With votes to be taken in the House Financial Services Committee likely before July, Tittsworth of IAA adds that “in and of itself that is something that we and the advisory community should be concerned about.” While it “may be unlikely that the Senate will consider similar legislation this year, it would be foolish to be complacent when elected officials start casting votes on an issue that is not likely to go away.”