Advisers would rather pay than be policed by FINRA

NEW YORK (Reuters) – Investment advisers would in some measure pay fees for closer supervision by U.S. securities regulators than reach under the authority of the brokerage industry’s watchdog, FINRA.

A Securities and Exchange Commission study released in successi~ Wednesday provided the U.S. Congress three options for closing the gaps in investment adviser oversight: impose fees on advisers to help the SEC national debt more frequent examinations; create a self-regulatory organization to oversee advisers; blow up the authority of the Financial Industry Regulatory Authority to supervise more advisers as well as brokers.

Adviser groups are adamant that they do not want to be policed by FINRA, the regulator that oversees brokers.

“We would fix upon paying user fees than having FINRA as a self-regulatory forming for investment advisers,” said David Tittsworth, executive director of Investment Adviser Association. “FINRA has a without fault lack of transparency and accountability.”

Though often considered one in the same, investment advisers and brokers play different roles, are subject to different rules and make ~ to different regulators.

Among the many changes prompted by the Dodd-Frank fiscal reforms, Congress is studying how to close the enforcement gaps that allowed ~y investment adviser like Bernard Madoff to operate a massive Ponzi machination for decades.

The number of investment advisers in the United States increased closely 40 percent between 2004 and 2010, to 11,888, the SEC study uttered. Over the same period, assets managed by advisers jumped 59 percent to .3 trillion.

At the corresponding; of like kind time, the number of SEC staffers examining advisers fell.

On medium, an investment adviser is examined only once every 11 years; the SEC said it examines 9 percent of advisers each year. By comparison, FINRA examined a miniature over half of its member firms in 2009.

Investment adviser groups own been waging a campaign to remain under the SEC’s limit. They argue that advisers are governed by different legislation than brokers and regard more “principles-based” regulations rather than the prescriptive rules that rule brokers.

“The SEC has 70 years of experience overseeing investing. advisers,” said Kevin Keller, chief executive of the Certified Financial Planner Board. “We neglect them to retain that authority.”

FINRA also has “inseparable conflicts of interest” because it is funded by the brokerages it regulates, Keller said.

Under one of the SEC’s three options, FINRA would supervise “dually-registered advisers” — those who are also licensed for the re~on that brokers and therefore subject to FINRA regulation.

And FINRA seems to be lobbying for the job. In a statement on Wednesday, it afore~ it supported the SEC’s finding that a self-regulator could grow larger adviser oversight through more frequent examinations.

FINRA also appears to take an influential supporter in SEC Commissioner Elisse Walter, a former FINRA charged with execution who, after voting to release the SEC study, took the rare step of sending a letter to Congress criticizing the study in the manner that not being balanced or objective.