FINRA Proposes Excluding RIAs from OBA Supervision
FINRA has proposed a new outside business activities supervision rule that would exclude independent investment advisers. Under the proposal, third party investment advisers would need to receive informed consent for their activities, but the BD would not have supervisory obligations. The BD could impose certain requirements based on a required risk assessment of conflicts of interest and customer confusion. The proposal also limits BD obligations to supervise non-investment related activities.
OUR TAKE: That sound you heard yesterday was the Greek chorus of cheers from investment advisers who have had to pay their broker-dealers a percentage of their advisory fees for required supervision. We expect the larger independent broker-dealers will lobby heavily against this proposal as it cuts off a lucrative revenue source. The proposal would help smaller regional firms that want to recruit reps but don’t have the currently-required supervisory resources. We expect much debate.