The National Association of Personal Financial Advisors (Napfa) is highly critical of a congressional proposal to remove the regulation of independent advisors from the jurisdiction of the SEC and place it under the purview of the Financial Industry Regulatory Authority (Finra).
In a statement released Wednesday, the association said Finra is more aligned with Wall Street interests than with the concerns of Main Street investors.
The bill being considered by Congress, called the Investment Advisory Oversight Act of 2012, would make Finra responsible for the examination and oversight of independent financial advisors, currently the SEC's responsibility.
"The American public needs to know that such a move would be bad for independent, objective professionals and those they serve," said Napfa, a national organization representing fee-only financial advisors, in its statement.
The SEC is an independent government agency, while Finra's member firms are broker/dealers, the companies that, according to Napfa, helped orchestrate the recent financial crisis.
"Finra collects fees from member firms and is managed by Wall Street insiders," Napfa said. It added that Finra executives are paid as much as 10 times more than their equivalents at the SEC. Napfa thinks these salaries should be benchmarked against those of SEC executives.
Finra is an organization that is out of touch with the independent advisory community and with the American public," said Susan John, Napfa's national chairwoman. "An organization that is designed to attend to commission-based broker/dealers and wirehouses has no business overseeing independent advisors who, by law, work in the best interests of their clients first."
But Richard G. Ketchum, the CEO of Finra, said that the SEC does not have the resources to oversee financial advisors, a point he made in testimony before the U.S. House Financial Services Committee, which is holding hearings on the bill. He contrasts the agency with Finra, which he said is the largest independent regulator for all securities firms doing business in the United States.
"The SEC and state regulators play vital roles in overseeing both broker/dealers and investment advisors, and they should continue to do so," Ketchum said. "Investor protection demands, however, that more resources be dedicated to regular and vigorous examination and day-to-day oversight of investment advisors.
"The current level of advisor exams is unacceptable, and authorizing the SEC to designate one or more self-regulatory organizations [like Finra] to assist it with overseeing investment advisors is the most efficient solution to addressing this critical investor protection issue."
Napfa is strongly encouraging members of the committee to reject the bill and instead provide the SEC with the resources it needs to oversee financial advisors.