SEC Oversight
Self-regulatory organizations work if there's aggressive SEC oversight, and the SEC has an "effective program" in place for overseeing Finra, Ketchum said.
The Boston Consulting Group found in a March report ordered by the Dodd-Frank Act that self-regulatory organizations, including Finra, don't have to regularly disclose information to the SEC regarding their regulatory operations. The SEC also doesn't have a consistent set of metrics or standards to assess Finra, the report said. Nester, the SEC spokesman, declined to comment on the agency's oversight of Finra or Finra's regulation of brokers.
As more investors turn to investment advisers for financial help, who regulates them will matter even more, said Lipner, the attorney who's also a law professor at Baruch College in New York. "If we want to seriously regulate investment advisers, we would not give it to Finra because it hasn't proved it's competent to protect the public interest."