The rash of Ponzi schemes involving RIAs, unregistered advisors and brokers raises many questions about regulators and advisors, and most of them are troubling. Why were so many regulators, not to mention supposedly sophisticated investors, asleep at the wheel before Madoff struck? Are some new entrants to the advisory business bringing a pump-and-dump, boom-boom room culture into what was a pretty clean world, at least by the standards of the financial services business?

Let's examine some of these questions.

1. After years of a respectable record on ethics and integrity, why is all this fraud suddenly surfacing? No doubt, much of it is related to Warren Buffett's quip, "When the tide goes out, we find out who is wearing a bathing suit." Given the amount of wealth vaporized in the second half of 2008, it's natural that investors would suddenly take an inventory of all their assets and try to convert many of them to liquid cash, particularly after Madoff struck. When they are told there is no cash or investment with value, they are likely to call a regulator.

2. The Madoff case left the SEC humiliated, even after it suffered the most humiliating year in its history. Presented with the biggest Ponzi scheme in modern times, gift-wrapped on a silver platter, SEC regulators dismissed it out of hand. The fact that Madoff was a member of their little self-regulatory club and a former chairman of NASDAQ created the appearance of cronyism that made their incompetence sting that much worse. Madoff began his scam at least two decades ago, and it's doubtful all these other Ponzi schemes were conceived yesterday or in 2007. So the question remains, isn't it a little strange that suddenly they are all surfacing at the same time?

3. It may be pure coincidence, but it's also a little strange when the RIA profession sees its image tarnished at exactly the same time that Washington regulators are attempting a massive restructuring of the entire financial services industry's regulatory framework. Making the RIA business look bad after a couple of decades of a squeaky clean image would appear to undermine the view of many RIAs that they should be regulated by the SEC, not FINRA, as they have been in the past, albeit with more oversight and detailed inspections.

4. The hottest trend in the RIA-independent brokerage space in the last three years has been the so-called breakaway brokers fleeing the wirehouses to conduct business in a way that supposedly serves the client first. No doubt many are sincere, decent professionals who want to do the right thing for clients. Yet many also came out of a culture where IPO pumping and dumping, account churning, Maui trips and taking female colleagues to boom-boom rooms were a part of everyday life. But some longtime independent RIAs are starting to ask the question, as the RIA space continues to expand, is advisor quality becoming an inevitable victim of growth?

5. A final question remains: Was the RIA business that evolved in the 1990s really as clean and pure as many folks, myself included, thought it was? I know hundreds of professionals in this business and it's gratifying to say that so far none of their names has surfaced. But with an estimated 65,000 people now employed in this arena, no one can know everyone, and as the universe increases, so do the odds of crooks finding their way into some firms.

There may be a temptation to view this confluence of events from a conspiratorial perspective. It certainly works to the SEC's advantage when seeking to harmonize regulations between brokers and RIAs if it can point to the RIA space as an unregulated Wild West where fraud can flourish, even if that misrepresents reality.

But just as the RIA business may be fighting to hold its way of life, so is the SEC. When tens of millions of Americans have seen their life savings cut by 40%, action is demanded. Most advisors seem willing to accept more oversight and inspection. And expect to see more actions like yesterday's SEC move to charge a New York RIA with failing to perform the research and due diligence he claimed before putting clients in a hedge fund.

But SEC chairwoman Mary Schapiro's stated intention of harmonizing regulations between RIAs and brokers deserves serious scrutiny and shouldn't be rammed through sweeping regulatory reform legislation as a footnote to a codicil. The flaws in the logic Schapiro has used to justify this-namely, that consumers don't know the difference between a broker and an RIA-are blatant. As Bob Veres has eloquently written, that would be the same as claiming doctors and drug salesmen should "harmonize" regulations if consumers can't differentiate their job functions.

Schapiro has promised to examine the whole issue with a pair of fresh eyes, and one can only hope she keeps her word. It's hard to believe she would want to go down in history as another sorry shill for Wall Street like Harvey Pitt did.

Finally, leaders of the advisory profession should rethink referring to marks like the CFP designation and organizations like NAPFA as "brands," as though they were Coca-Cola and Tylenol. In recent months, I've heard several long-standing CFP licensees and NAPFA members voice concerns that some of the newer designees or organization members have sought membership simply to gain marketing credibility. In case you hadn't noticed, credibility is very hard to win and awfully easy to lose.

Too many people in this business have spent years working, sometimes at great sacrifice with modest remuneration, for no other reason than that they wanted to do the right thing for clients. To let a few bad apples and misguided regulators gut an honorable profession would be a disaster.