Congressman Pushes FINRA to Examine Investment Advisors

French Hill, a Republican congressman from Arkansas, proposed to shift oversight of investment advisors to the Financial Industry Regulatory Authority (FINRA) from the Securities and Exchange Commission (SEC). He is considering legislation that would give FINRA the authority to examine investment advisors. His stated motivation for doing so is to increase the percentage of advisor examined annually. Officials of the Investment Adviser Association (IAA) spoke out against his proposed legislation after being debated in Congress for years. Last week, a House Financial Services Committee bill passed that would provide a safe space to allow advisers and broker/dealers to provide data on exchange-traded funds (ETFs) to their clients without reports to be considered “offers.” The IAA still believes that the best option is to retain the SEC’s primacy in investment advisor regulation and oversight.

The IAA is in strong opposition to the SRO model. They believe that the model would impose an unnecessary layer of regulation and bureaucracy on advisors beyond what is necessary to increase examinations. They believe there would be questions regarding transparency, accountability, track record and appropriate oversight by the SEC and Congress. A spokesperson for the IAA was quoted as saying: “The IAA will continue its effort to ensure that the SEC has the resources it needs to do the job that it is legally mandated to do.”