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March 01, 2018 at 01:36 PM
The Financial Industry Regulatory Authority is likely to get pushback from large independent broker-dealers regarding the proposed rule floated Wednesday to free broker-dealers of liability over investment advisors’ outside business activities.
While “cheers” will be heard from investment advisors “who have had to pay their broker-dealers a percentage of their advisory fees for required supervision,” said Cipperman Compliance Services, “the larger independent broker-dealers will lobby heavily against this proposal as it cuts off a lucrative revenue source.”
However, the plan “would help smaller regional firms that want to recruit reps but don’t have the currently -required supervisory resources,” Cipperman opined. “We expect much debate.”
Indeed, Jon Henschen of BD recruiting firm Henschen & Associates told ThinkAdvisor in a previous interview that the plan is a “good-news, bad-news story.”
The proposed rule on outside business activities seeks to streamline BDs’ obligations by “generally excluding from FINRA’s rule on a registered person’s personal investments and work performed on behalf of a firm’s affiliate,” and eliminate supervisory obligations for non-broker-dealer outside activities, including investment advisory activities at an unaffiliated third-party advisor, Henschen explained.
