Ever since the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in July 2010, RIAs have been wondering what regulatory agency they would ultimately answer to. While that question still hasn’t been resolved, Sen. Max Bachus introduced legislation last week that would transfer regulation of RIAs from the Securities and Exchange Commission (SEC) to a separate agency, most likely the Financial Industry Regulatory Authority.
This issue isn’t without controversy, to put it mildly. Many RIAs aren’t thrilled at the thought of being regulated by FINRA (which currently regulates brokers) because they believe FINRA isn’t equipped to enforce the fiduciary standard and prefer SEC oversight. FINRA, for it’s part, is eager to consolidate its influence and authority over the industry and has lobbied for this power ever since Dodd-Frank passed.
It’s a complicated situation and a complex decision for Congress for a number of reasons, including:
So what’s our take here at ClientWise? As a coach for both RIAs and financial advisors who operate under broker-dealers and wirehouses, we are very cognizant of the impact of regulatory changes on both groups. It seems wisest to resolve the fiduciary standard issue first via the SEC, then decide on the most appropriate regulatory structure, whether that’s the SEC, FINRA or another SRO.
For more food for thought on this issue, which will still likely take months to resolve, here are some interesting articles, videos and blog posts:
As the saying goes...stay tuned!
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