FINRA Chairman Makes Strong Case for Adviser SRO
In Congressional testimony, FINRA Chairman and CEO Richard Ketchum pressed for the designation of a self-regulatory organization (i.e. FINRA) to supervise retail investment advisers. Mr. Ketchum, citing a recent SEC study, argued that the SEC had insufficient resources to properly supervise, examine, and discipline several thousand investment advisers. Mr. Ketchum, acknowledging opponents’ concerns, said that an adviser SRO would focus on examinations and enforcement and would be subject to SEC supervision. Mr. Ketchum supported the exclusion of mutual fund and private fund managers from the contemplated SRO. Mr. Ketchum also again supported a fiduciary standard for retail broker-dealers.
OUR TAKE: Mr. Ketchum may have significantly advanced FINRA’s aspirations to regulate advisers by conceding policy-making and supervision to the SEC and focusing on examinations and enforcement. We think the fiduciary standard for brokers is a foregone conclusion. We are starting to believe that FINRA will become the new retail adviser SRO.