Although the SEC’s “Study on Investment Advisers and Broker-Dealers,” frequently referred to as the Fiduciary Study, and the SEC’s “Study on Enhancing Investment Adviser Examinations” often referred to as the SRO Study, are separate, in the eyes of some industry experts and academics that specialize in financial services issues, the two are linked.
In keynote remarks at a panel discussion and Webcast on Thursday, Tom Bradley, president of TD Ameritrade Institutional, noted that it isn’t that we need more regulation for broker-dealers and registered investment advisors; “it has to be better,” regulation. Bradley says there’s room for both, “a purer sales role, and a purer advisory role,” in financial services, and advises that regulators “get rid of incidental advice,” in which brokers are allowed to give advice to customers in the process of making a sale, but that the advice generally doesn’t have to be in the best interest of the customer.
Hosted by Center on Financial Services Law at New York Law School, and The Committee for the Fiduciary Standard, the panel was introduced by Ronald Filler, professor of law and director, Center on Financial Services Law. This editor is a member of the Committee.
The event brought together James Fanto, professor, Brooklyn Law School; Thomas Selman, EVP, Regulatory Policy, FINRA; Michael Koffler, partner, Sutherland Asbill & Brennan; Robert Colby, partner, Davis Polk & Wardwell and former SEC deputy director of Market Regulation and Knut Rostad, chairman, The Committee for the Fiduciary Standard and regulatory and compliance officer at the RIA Rembert Pendleton Jackson. Tara Siegel Bernard, personal finance reporter at The New York Times, moderated the panel.
Noting that many firms have dual roles as BD and RIA, and that often the advice falls under the RIA “umbrella,” Bradley segued to the SRO Study. At issue: the lack of funding for the SEC and the growth in RIA firms means that currently, RIAs are examined only “once every 11 years,” the SRO Study says. The SEC listed three recommendations: RIAs could pay fees to the SEC and have the SEC remain as the RIA supervisor and enforcer; form a self-regulatory organization (SRO) for RIAs (FINRA would like that role, according to Selman), and/or FINRA could be the SRO for BDs who also have an RIA arm.
Bradley says 50% of his RIA clients said in a recent survey that they want the SEC to remain their regulator. For “dual firms, it makes sense for the SEC to farm out exams to FINRA,” he added.