At the helm in stormy seas

A leading securities regulator for the lion's share of his career, Finra chairman and chief executive Richard Ketchum is poised to oversee one of the most significant day-to-day changes most registered representatives will ever experience.

A leading securities regulator for the lion’s share of his career, Finra chairman and chief executive Richard Ketchum is poised to oversee one of the most significant day-to-day changes most registered representatives will ever experience.

If pending legislation in Congress becomes law next year, the 643,000 registered reps holding a license from the Financial Industry Regulatory Authority Inc. would be required to abide by a fiduciary standard. Although the exact terms of the standard remain unresolved, reps would be expected to work in the best interests of their clients instead of merely ensuring the suitability of the investment products they sold.

Many brokers, particularly those who practice financial planning, already abide by a fiduciary standard.

Finra is behind the change, which is a distinction lost on many investors and others outside the securities industry. But the shift would require brokers to take on more responsibility and liability, and would have a clear effect on how they conduct business.

Mr. Ketchum also clearly wants to expand Finra’s reach: He’s campaigning to gain oversight of registered investment advisers, which are now regulated by the states and the Securities and Exchange Commission.

“The move to regulate financial advisers is his initiative,” and Mr. Ketchum believes Finra has the authority to regulate RIAs, said one longtime associate, who asked not to be identified. “He feels investors are not adequately protected.”

Mr. Ketchum, who became chief executive of Finra in March following Mary Schapiro’s departure to head the SEC, will also have to deal with the fallout from a report that Finra paid 13 current and former Finra executives more than $1 million apiece in 2008 at a time when the organization suffered an operating loss of $696 million (InvestmentNews, Dec. 7).

His own salary was $122,500 last year for serving as chairman, according to a tax filing. Mr. Ketchum was formerly CEO of the New York Stock Exchange’s regulatory unit, which merged with NASD in late 2007 to form Finra.

Mr. Ketchum will be a primary adviser to members of Congress as they grapple with regulatory reform, said Neal Sullivan, a partner with the law firm Bingham McCutchen LLP. “It would be a surprise to me if policymakers” didn’t go to the head of Finra and ask what works and what doesn’t work, he said.