FINRA’s Ketchum Criticizes DOL Fiduciary Plan

FINRA is "reviewing" DOL's redraft, Ketchum told lawmakers, noting that while it appears Labor has made "strides in creating a more balanced rule," he questioned the accuracy of the plan's "description" of broker-dealers.

When asked to clarify this inaccuracy after his remarks, Ketchum stated: "I think the DOL rule is a very good-faith effort to address a complex area," but "some of their safe harbor descriptions in the reproposal itself are very narrow from the standpoint of broker-dealer activity, and don't really describe a broker-dealer model that I'm aware of from the standpoint of safe harbors." Rep. Randy Hultgren, R-Ill., asked Ketchum if the "only solution" to fix investor confusion about the differences between investment advisor and broker standards of care is to impose a fiduciary standard on brokers. Hultgren is a co-sponsor of the Retail Investor Protection Act, a bill requiring the SEC to move first on a fiduciary rule before DOL and to study "alternatives" to a fiduciary standard.

Ketchum responded: "I think there are a number of ways, and I think it's a challenge for all of us to look for ways to increase" investors' understanding of disclosure. "I think a large part of the best interest standard should be requiring that firms manage their conflicts and provide proper due diligence." Such a rule "should always have the balance to ensure not to impose unnecessary costs."

As to the CARDS proposal, Ketchum said the plan "has consistently evolved" due to comments from the industry.

If FINRA does "move forward" with a CARDS proposal, "it will go back to our board and be put out as a new notice to the industry and other segments for a public comment period" before FINRA decides to file a proposed rule with the SEC, Ketchum said. "It will take a considerable amount of time."

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• Commentary: Why Commissions Are Also Bad for Brokers