Finra Chairman and CEO Rick Ketchum laid out his vision for how his agency would operate if it becomes the self-regulatory organization of investment advisors in his comments that kicked off FSI's OneVoice 2011 Broker-Dealer conference in Phoenix on Monday.
In a wide-ranging conversion with Dale Brown, president and CEO of the Financial Services Institute, Ketchum's remarks focused on two recent SEC studies mandated by the Dodd-Frank bill dealing with investment advisor oversight and the fiduciary standard.
Regarding the former, the SEC last month recommended one of three options: imposing user fees on SEC-registered advisors to pay for SEC exams; authorizing one or more self-regulatory organizations (SROs), under SEC oversight, to examine advisors; or authorizing Finra to examine dually registered advisors who both sell products and dispense investment advice.
FSI, an advocacy group representing independent broker-dealers, endorses Finra--the broker-dealer regulator--as the SRO for all financial advisors in order to close the regulatory gap between investment advisors and broker-dealers. Ketchum said Finra is up to the task, but has no intention of front-running the SEC if it becomes the industry SRO.
That said, Ketchum said the most important thing to come out of the SEC study on RIA oversight is the agency's recognition that it currently doesn't have the resources to adequately examine investment advisors, and that there has to be another solution that could include one or more SROs to take on oversight responsibility.
Investment advisors are currently regulated by the SEC and the states, and Ketchum acknowledged the wariness RIAs have about being regulated by Finra.
"There's an understandable concern over a new regulator walking in that may provide a different approach," Ketchum said. "It's our responsibility to respond to that."
One way to address those concerns, he said, would be to bring on board senior-level staff with "substantial investment advisory experience and responsibility" to provide fresh perspective on the standard of care requirements for both investment advisors and broker-dealers.
The SEC in late-January recommended a common fiduciary standard for RIAs and brokers who provide personalized investment advice, and that a uniform fiduciary standard should be no less stringent than what's currently applied to RIAs.
Ketchum has long called for a single fiduciary standard of care. "It creates oversight simplicity," he said, adding that it's a complex issue that will require a multi-faceted approach.