FINRA Chief Wants FINRA to Regulate RIAs and Apply Fiduciary Standard to BDs
In his first speech as Chairman and CEO of FINRA, Richard Ketchum argued that FINRA should assume regulation of investment advisers and apply a reconciled fiduciary standard to both investment advisers and broker-dealers. He called the disparity in the oversight regimes for broker-dealers and investment advisers the “most glaring example of what needs to be fixed in the current [regulatory] system.” He asserted that “FINRA is uniquely positioned from a regulatory standpoint to build an oversight program for investment advisers quickly and efficiently.” Supporting his position that FINRA rather than the SEC should supervise investment advisers, Mr. Ketchum cited the Madoff scandal and noted that in 2007 the SEC conducted fewer than 1,500 exams of the 11,000 registered investment advisers it supervises while FINRA conducts 2,500 annual exams of the 4,900 firms it supervises. With respect to a reconciled standard of care, Mr. Ketchum proposed a fiduciary standard that “can effectively be applied to broker-dealer selling activities.”
OUR TAKE: We believe that a single regulatory regime for BD and RIAs will happen and that a fiduciary standard for both will apply. The question is whether regulatory oversight will be given to FINRA or the SEC.