Bill Introduced to Clear Way for FINRA to Become Industry SRO

[ack21311]

This is going to be a very exciting debate.


Already people are lining up from and against this



What are your opinions?

[the observer]

I still haven't seen any information in writing as to whether State Registered Investment Advisers with no FINRA affiliation are going to be impacted by this legislation.

Is Congress seeking to eliminate State registration of investment advisers?

Is Congress demanding that State registered investment advisers now be dually registered even though they sell no product for commission and are not affiliated with a B/D?

If this were to be the case, frankly, I'd definitely consider retirement as an option.

I refuse to have another FINRA moron in my practice asking me for photocopies of my Christmas cards to see if I wrote: wishing you a "prosperous new year" on them.

The blame for this entire movement and this legislation is down to the Financial Planning Coalition, that somehow managed to make a mountain from a molehill, convincing Congress that action was needed where none was while certain of their members (NAPFA's presidents and others for example) robbed their clients blindly. Now, they are opposed to the end result. Well since they are opposed to what they've created, I hope the bloody thing passes, even if I ultimately retire from the business. One thing is certain, if this passes the coalition partners will lose membership and influence, setting back the "profession" by years. But what am I saying for years they've been less concerned with financial planning and a lot more concerned with the regulation of "securities and investment advice... Like we need more of that! We need a change in direction from these oligarchic Boards, or we need to stop giving them money to support their misguided campaigns!

[Epictitus]

I can get behind it if my Series 7 doesn't die on the vine because I'm at an RIA firm.

[cc_marca]

Spencer Bachus is the representative for the 6th district in Alabama, not Louisiana. Although, Louisiana can have him...

[LKC3]

Ridiculous, they do not protect the investors (did not catch Madoff or Stanford). Charge fees that over the top to pay for over the top salaries. They are raising fees anyway. I can agree that there needs to be some base set of regulations but I would rather have 2 different groups and not 1 fiduciary standard. You want to (be a B/D) sell commission then sell commission products, someone else may want to be an RIA and charge fees. All this regulation is a problem. People need to take some responsibility for their own investments vs everything being someone else's fault and calling for government solve the problem with regulation, it does not work. Politicians do not solve problems, people taking responsibility do and if they did there would be no need for regulation or politicians.

[the observer]

Well, I got the answer to my own questions in the form of a NASAA press release. FINRA wants to control us all, including State registered investment advisers!! BE AFRAID!!!

NASAA STATEMENT ON INVESTMENT ADVISER OVERSIGHT ACT

WASHINGTON (March 25, 2012) The following is a statement from Jack E. Herstein, president of the North American Securities Administrators Association (NASAA) and Assistant Director of the Nebraska Department of Banking & Finance, Bureau of Securities, regarding the “Investment Adviser Oversight Act of 2012 introduced today by House Financial Services Committee Chairman Spencer Bachus (R-AL).

The regulation of investment advisers long has been the shared responsibility of state and federal securities regulators. Chairman Bachus believes a self-regulatory organization for investment advisers is necessary because the federal government has not provided proper oversight over larger advisers, but his bill also would require state-registered advisers to become members of his new SRO. The creation of an SRO for state-regulated investment advisers is a misguided solution to a problem that does not exist.

There has never been any evidence to suggest that states have failed in their mission of regulating smaller investment advisers. Nonetheless, this bill dictates how each state should regulate smaller advisers and requires state-regulated advisers to join a national SRO. The Bachus bill is an astonishing attack on our system of federalism with no demonstrated justification.

While there have been marginal improvements from the draft Chairman Bachus released last September in the areas of conflicts of interest and information sharing, the nationalization of small and mid-sized investment adviser regulation would be a mistake that neither benefits investors nor promotes small business interests. Shifting their regulation to a central office would subject these small businesses to redundant regulation and add unnecessary costs to support this new bureaucracy. State securities regulators are best positioned to be the primary regulatory for small and mid-sized investment advisers.

[Stephen Winks]

Under FINRA it is indisputable that brokers are neither accountable for their recommendations nor do they acknowledge any ongoing responsibility to act in the best interest of their client concerning their recommendations. This has resulted in the loss of trust and confidence of the investing public who without exception expect the broker to act in their best interest.

Advisors hope that brokers will adopt something less than the traditional understanding of fiduciary duty, as brokers will have a permanently inferior competitive market position to advisors. It is very easy to prove that brokers are neither accountable or responsible using the industry's own language which assures no advice is rendered and an absolution from any fiduciary duty.

Brokerage interests opposed to the fiduciary standing should be careful what they pray for, as what they may get is in fact self defeating counter to the best interest of the investing public.

Brokers do not operate in a vacuum and enterprising advisors will make it clear to the consumer how their best interests are subordinated to that of the broker and the broker's firm.

SCW

[Bradly T.]

What will the dualies do Mr. Winks? Will our heads spin off? Two standards or one will not change the growth of dualies as the best model now AND then to provide the fullest spectrum of product AND services to the greatest number of American households and do so on the crest of the boomer wave...all of whom need far more than managed accounts.

[Stephen Winks]

Bradley T,

It all depends on what the investor wants. So far, no one is eager for their advisor to act against their best interest.

When England and Australia required fiduciary standing from all advisors, significantly more than 70% of their insurance agents left the business.

Fiduciary responsibility is a very serious business as the associated liability leaves no room for one to mistakenly claim fiduciary standing.

My guess is a small number of very skilled advisors offering expert fiduciary standing will build very large practices.

Several multi billion advisory services firms are already emerging, as they focus on authenticated prudent process, advanced technology, work flow management, conflict management, expert advisory services support for each of the ten major market segments advisors serve in support of expert fiduciary standing, not investment products and an extrapolation of the brokerage business model.

The brokerage business model must reconcile not being accountable or responsible with the fiduciary duty requiring accountability and ongoing accountability. The informed investor always makes the right decision.

SCW

[Bradly T.]

You mean those "informed" millionaire, billionaire, institutional investors with Madoff, Starr, and a host of other fiduciaries in jail or under indictment? They knew what was in their interest and these fiduciaries provided it...by regulation? Or because all under the standard are more ethical than all others? Interesting. And rediculous.

[the observer]

Mr. Winks, you wrote: "When England and Australia required fiduciary standing from all advisors, significantly more than 70% of their insurance agents left the business."

I really need you to substantiate this statement. It sounds wonderful, but I can find no evidence that this happened or that fiduciary standing is required in the United Kingdom. Nor can I find any evidence that 70% of U.K. insurance agents left the business. Please share your sources and paragraph and verse from British law to this effect.

Thank You.

[Stephen Winks]

The Observer,

You need to gp no further than AXA and Equitable.

SCW

[the observer]

Actually... I DO need to go further. These kind of statements made by you in an offhand fashion require substantiation for the remainder of any of your arguments to hold weight. I don't care about AXA and Equitable, they do not regulate insurance and financial services in the United Kingdom.

Your last claims in this regard caused me to contact the Financial Services Authority in the United Kingdom on the issue of fiduciary and the loss of insurance agents. Their formal response was basically, that they had no idea what I was talking about.

Unless you have paragraph and verse from the FSA, the regulatory body governing financial planning in the UK, their handbook or any other evidence from The Financial Conduct Authority as they are now known, I'd suggest you desist from spreading this kind of false rumor.

[Stephen Winks]

The observer,

If you spoke to the FSA and they had no idea that insurance agents were held to the fiduciary standard of care, the person you have go beyond speaking to clerical staff. Just google it yourself.

SCW

[the observer]

Since I have a license to own an investment company in the European Union, which include the United Kingdom, I know who to speak to and they were not clerical staff, but rather, members of the business operations unit of the FSA.

I would once again ask you to kindly point me to the FSA handbook regulation that supports your claims.

Also, if you'd like to provide Google references to support your assertions regarding the mass exodus of insurance agents, I'll review them, however, you cannot continue to make such wild claims without any substantiation whatsoever.

[Bradly T.]

It would appear that Winks believes there should be less insurance - premium paid, pooled risk transfer - and fewer agents to provide that insurance. Less competition serves his agenda well which inherently includes an elitist and exclusionary perspective. So what if average IRA balances are too small for any fiduciary access or if they need protection from risk? Who cares? But then, Winks has been consistantly wrong on priority issues and solutions chosen by the regulators and legislators he and the Noncoalition have been lobbying for 3 years now. The powers that be seem to think, and the headlines and court dockets agree, that whatever evil lurks in retail lies at the feet of so-called fiduciaries - especially those with custody - most especially those IN custody. So Winks lies have failed to win that favor so eagerly sought and the backfire now has dedicated professionals, ala the observer, in the cross hairs of new regs, new costs, new barriers, and the blame for retail's ills. For what has changed for BDs and dualies? Very little. Harmonization has changed one model far more than any other - the managed account model.

[the observer]

Hi Brad!

You know I'm a fiduciary adviser with no FINRA affiliation and this entire argument doesn't affect me, other than, significant competition will destroy the small guy and completely devastate the poor and middle class consumer, so I guess I have a stake in the outcome.

HOWEVER, I'm still insistent that the world doesn't need "two" fiduciary adviser registrations.

Series 6 & 7 registrants are salespeople... nothing wrong in that, but that's what they are registered to do, sell stuff. They are not fiduciaries and shouldn't be giving "personalized investment advice". They are "Registered Representatives". I held a 6,7,24, & 63 for 25 years and sold stuff for commission, nothing wrong with that, been there done that, moved on! If registered representatives were forced to use their title by FINRA, it would be clear that they were "representing" someone, the B/D in this case. Unfortunately, they are sexed up with Vice President, senior investment consultant, financial consultant, senior financial adviser and all sorts of other titles that obfuscate their training and qualifications.

Series 65's are registered investment "advisers" and entitled to provide personalized investment advice. They are fiduciaries. They don't need little chits with printed fiduciary oaths from NAPFA, they are fiduciaries under the law.

If the SEC and FINRA had done the right job and always properly enforced the law and the boundaries of each registration, there would be no need for this nonsense. Instead, the SEC and FINRA rubber stamped and allowed the Merrill rule to exist and completely blurred the line for everyone. They had to be sued by the FPA to rescind the rule, the one good thing the FPA has done to try and clarify who can do what. Hasn't stopped the use of designations though, some of which should be banned but are still listed on FINRA's website.

The regulators should all be sued to enforce the regulations already on the books and:

1. Prevent companies from obfuscating the registrations and qualifications of its sales force with titles that convey any other meaning than "representative and salesman, and

2. Punish those who provide Personalized investment advice without proper registration, and

3. Give the poor and middle class a voice and choice, but a choice that is fully disclosed up front.

They also need to erect larger barriers within broker dealer / RIA's to ensure that clients cannot be lured into a relationship with the promise of a fiduciary financial plan, only to have this plan implemented by the same investment adviser/registered representative in his capacity as a registered representative on a brokerage basis without fiduciary liability.

All this things are easy to implement without the need for additional regulation or long discussions. It requires only the heads at the SEC and FINRA to do their job in the first place!

Consumers should have a choice, Congress wanted consumers to have a choice and the SEC and FINRA created separate and distinct registrations so that consumers could choose. It is the complete disregard for the boundaries of these registrations by Broker Dealer/RIA's and total lack of enforcement by the regulatory bodies that has allowed this fight for fiduciary status for brokers to get as far as it has.

The stupidity of creating a second fiduciary registration when one already exists seems to be lost on everyone... These people in Congress, FINRA and the SEC should rush down to the first garage in Washington DC and get the air in their heads changed!

[Bradly T.]

Let me repeat what I have said so many times in the past regarding your very salient point - the very term Financial Advisor should be banished and should NEVER have been allowed, for this is the very crux of your post. This misnomer has been adopted by agents, reps, investment advisors, and planners, and bankers, and everyone else specifically to NOT disclose actual licensing, registration, function, or obligation. This has been the industry's attempt to "harmonize" by obfuscation. Agreed, the public never did know the distinctions - but now? There are no distinctions. Not public ones anyway. I do empathize with you and those other ethical and expert practitioners who have now been hijacked by the competition. The sad irony is that Winks and the Noncoaltion somehow expected it to go the other way - either the end of choice and commissions or the 40s Act fiduciary obligation being foisted on BDs. I do not know the best way to fix whatever may be broken (still waiting for any such evidence)....but we all know the worst way. Thanks there Winks. You and your cronies have delivered quite a bucket of crap on the heads of those you "champion". Hang in there observer and remember what the fabulous Twain said, "Nine out of ten of the worst things that ever happened to me never did happen"....I just worried a great deal about it.

[the observer]

Hi Brad,

I think there are many things that can be done right now without the need for intervention by Congress... ONLY, these will not get done as long as the SEC and FINRA don't get a change in both leadership and direction, the same kind of leadership and direction change that is needed at CFP Board.

With the hiring of a former NASAA enforcer, we now have a new list of sanctions that addresses directly, the investment of assets, in other words, another quasi private investment adviser regulator who is overlaying regulations with almost identical regulations already in place. The stupidity of this is lost on the current Board. They are not securities regulators, and yet they try to further regulate the securities business as a private non-profit... it's appalling!

FINRA is clearly broken and not the organization to regulate investment advisers. HOWEVER, because it would REALLY piss off the FP Coalition to have the SEC surrender this control to FINRA, I'm already wishing it will happen, particularly since there are, apparently, now amendments that will exempt smaller State registered RIA's.

I can't wait for FINRA to roll into some of these big RIA's find out that their AUM isn't actually AUM but has been farmed out and, oh by the way, did you really write "wishing you a very prosperous New Year on your Christmas cards!??" LMAO

[Stephen Winks]

the observer and Bradley T,

You might check the BBC, a pretty credible source, on whether financial advisors are banned from commission sales in 2012.

Amazing that you are not aware of this since you are active in the European market.

SCW

[the observer]

Mr Winks,

Your assertion is that all insurance agents are fiduciaries in the United Kingdom and that 70% left the business because of it... This has nothing to do with method of compensation. For those interested, the BBC story Mr. Winks refers to is:

http://news.bbc.co.uk/2/hi/business/8589042.stm

Note HOWEVER, that the story also says: "The new policy will apply to the sale of investments such as pensions, annuities and unit trusts but not to mortgages and insurance policies."

SO YES, I am aware of this story and its content, but again I ask, kindly back up your previous assertions with paragraph and verse from the FSA manual AND any other documentation that the United Kingdom now has 70% less insurance agents... particularly since the law on commissions for insurance agents has not changed.