Security - Check Permissions

MFDF - Mutual Fund Directors Forum - FINRA As Investment Adviser SRO

Member Login

Request an account

Sample Banner 2

FINRA As Investment Adviser SRO

In recent testimony before the House Committee on Financial Services, FINRA Chairman and Chief Executive Officer Richard Ketchum discussed FINRA's potential role as a self-regulatory organization (SRO) for investment advisers. 

Mr. Ketchum discussed the recent convergence of investment adviser and broker-dealer businesses, stating that most customers would not be able to differentiate between the services and protections provided by the two.  He expressed concern about the current differing regulatory regimes as follows:

Because broker-dealers and investment advisers operate under vastly different levels of oversight due to resource constraints of government regulators, firms offering similar services can arbitrage regulation by choosing a form of registration that offers the least regulatory oversight and minimizes the risk of enforcement if the firm engages in misconduct.

He then shared FINRA's view regarding the appropriate standard of care and regulation of both broker-dealers and investment advisers:

the standard of care in both channels should be a fiduciary standard for the provision of personalized investment advice to retail customers. However, just as critical as harmonizing standard of care is the need for a consistent oversight regime to ensure investors are being properly protected. As the SEC's study notes, "to fully protect the interests of retail investors, the Commission should couple the fiduciary duty with effective oversight."

Mr. Ketchum then provided an overview of FINRA's experience as an SRO.  He also discussed FINRA's estimates of the potential cost of FINRA becoming and SRO covering investment advisers.

Mr. Ketchum's full testimony is available at