Regulation And Legislation

Finra’s Ketchum touts one standard for financial advisers

The difference in regulatory oversight for broker-dealers and investment advisers leaves consumers open to risks, Richard Ketchum, chief executive of the Financial Industry Regulatory Authority Inc., said today.

The difference in regulatory oversight for broker-dealers and investment advisers leaves consumers open to risks, Richard Ketchum, chief executive of the Financial Industry Regulatory Authority Inc., said today.
“The [Securities and Exchange Commission] and state regulators play vital roles in overseeing both, and they should continue to do so, but they need to dedicate resources to more-vigorous oversight,” he said during the keynote speech at NAVA’s regulatory and legislative conference in Washington. The variable annuity trade association is based in Reston, Va.
However, in order to regulate effectively, New York- and Washington-based Finra would have to recognize that its advisers and broker-dealers don’t have the same business models, particularly with regard to fiduciary standards versus suitability, Mr, Ketchum said.
He said that there is a need to evaluate seriously “whether a properly designed fiduciary standard can be applied to broker-dealers’ selling activities.”
The matter of fiduciary standards versus suitability standards will be on the table as Finra concentrates on enhancing investor protections, Mr. Ketchum said. Nevertheless, the current dual oversight model must be changed, he said.
“Two standards are untenable in this world for persons engaging in similar activities,” Mr. Ketchum said.
Although the SEC has oversight of more than 11,000 investment advisers, the commission hasn’t been able to examine the entirety of its constituency, primarily because it lacks the resources necessary to scrutinize advisers’ day-to-day business, he said.
“In recent months, various Ponzi schemes have underscored the need for additional oversight,” said Mr. Ketchum, adding that a third party — such as Finra — could provide the resources for that oversight. “Finra would ensure that investment advisers are properly examined and consumers properly protected.”