The Financial Industry Regulatory Authority has now set its sights on the Senate to push a bill that would give FINRA the authority to become the self-regulatory organization (SRO) for advisors, as the House Financial Services Committee is unlikely to pursue an SRO bill this year.
“FINRA has been trying for several months to quietly obtain sponsors for an SRO bill in the Senate, rather than in the House” where the self-regulator failed to have former House Financial Services Committee Chairman Rep. Spencer Bachus’ bill “come up for a vote at the committee level last year,” Ron Rhoades, assistant professor and chairman of the financial planning program at Alfred State College, told AdvisorOne on Thursday.
Karen Nystrom, head of public policy and advocacy for the National Association of Personal Financial Advisors (NAPFA), confirmed that rumors have indeed been swirling that FINRA is seeking Senate sponsors for an SRO bill. However, she told AdvisorOne, no supporters have surfaced yet.
Comments made by FINRA CEO Richard Ketchum (right) to Reuters on Wednesday seemed to give advisors a glint of hope that FINRA had decided to abandon its efforts to become the SRO for advisors. Ketchum said that FINRA would forgo, for now, its attempts to get the House Financial Services Committee to revisit this year Bachus’ SRO bill, particularly since newly christened chairman Rep. Jeb Hensarling, R-Texas, has taken the helm. “I’m not a big believer in beating a head against the wall,” Ketchum told Reuters. “We’ll focus on things we can impact.”
Ketchum did not respond by publication to AdvisorOne’s request for confirmation that FINRA was seeking a Senate SRO bill sponsor.
A FINRA spokesperson told AdvisorOne on Thursday that “while there is shared concern about the lack of resources devoted to IA oversight, there is clearly a lack of consensus about how best to address that problem. It remains a critical investor protection issue and our views remain that it should be addressed as soon as possible.”
While “other issues” are closer to the top of Congress’ agenda, the advisor SRO issue “will likely not be resolved in the near term. Hopefully for investors that entrust their funds to investment advisors, the issue will get another look in the not-too-distant future,” the spokesperson said.
Hensarling, who took over in January, is said not to be keen on Bachus’ SRO bill and is likely to focus on other issues this year, such as reforming Fannie Mae and Freddie Mac as well as certain aspects of the Dodd-Frank Act.
Nystrom said in November that the Financial Planning Coalition planned this year to thwart passage of an SRO bill by ensuring a “bipartisan bill” originates in the Senate allowing the Securities and Exchange Commission (SEC) to collect user fees from advisors to fund their exams. She told AdvisorOne on Thursday that the coalition—which includes NAPFA, the CFP Board and the Financial Planning Association—“still believes” user fees are the best way to ensure advisors are examined more often.
“The coalition very much takes the investor protection issue” of advisor exams “seriously, and wants to improve the examination process and increase the frequency” of advisor exams, Nystrom told AdvisorOne on Thursday.