By all accounts, FINRA's new CEO Rick Ketchum is an honorable "public servant" who has spent most of his life working hard to make our financial markets a better place. It's no secret that the folks at FINRA would like to take over RIA regulation from the SEC, and with former FINRA CEO Mary Schapiro now running the SEC, their chances look better than ever.

Yet in the last two weeks, Ketchum has made several public statements complaining that FINRA never even had the ability to investigate, much less oversee, Bernard Madoff's mega-fraud purported investment advisory business. Ketchum's remarks are disingenuous at best and downright misleading at worst.

Back in the early 1990s, when Madoff says he began his Ponzi scheme, FINRA's predecessor organization, the NASD, was issuing several notices to members regarding "selling away" activities, particularly those that included engaging in investment management services outside of their B-D. This is exactly the same type of service that Madoff was engaged in. The NASD's position was that B-Ds would be held responsible for any RIA activities that NASD member firms' reps engaged in and would be expected to supervise them.

Both the NASD, which has since changed its name to FINRA in a fashion reminiscent of a limited partnership sponsor, and the SEC were fully aware of Madoff's investment management business. At the same time as the NASD was putting out its "selling away" regulations, who was serving as chairman of its Nasdaq? None other than Bernard Madoff. No wonder they changed their name.

Yet Madoff was allowed to continue his investment management business-and grow it-without having to register as an RIA until 2005. For the sake of comparison, I know freelance writers who were providing answers to investors' questions on an AOL page, an "Ask Alan" type of thing, who were told by their lawyers to register as RIAs in the late 1990s.

This nation needs to have a serious debate about the future of financial regulation. RIAs are going to face more inspections and examinations, and they should. Standards for NASD-licensed brokers-oops, FINRA-licensed brokers-should be raised to a level that approaches a fiduciary standard.

FINRA may gain more power, the SEC may gain or lose power, or both institutions may be replaced by something with a much broader mandate, like the U.K.'s Financial Services Authority that oversees many different financial industries and coordinates all regulations.

Ketchum is a decent person with lots of experience. But misleading statements aimed at growing his power base don't serve the public interest.