When Financial Planning editors put together topics for a roundtable on regulatory and compliance issues affecting independent advisors and broker-dealers, we decided not to bring up the Bernie Madoff scandal. After all, Madoff's story has been dissected so extensively since his arrest in December 2008, we thought just mentioning his name would be overkill. But it seems that today, you just can't get away from Madoff. In fact, his name came up numerous times during an hour-long teleconference Financial Planning held on Feb. 2.

Whether we like it or not, we do live in a post-Madoff world, and it's impossible to separate his crimes from the dialogue surrounding regulatory reform. So we convened a panel of industry experts who could weigh in on the meaning of smart regulation, the fiduciary standard, compliance in the age of social media and the debate over who should have regulatory authority over investment advisors.

Our panelists: Tracy DeWald, general counsel for Securities America; Marilyn Capelli Dimitroff, president of Capelli Financial Services and former chair of the CFP Board of Standards; Kristina Fausti, director of legal and regulatory affairs at fi360, a fiduciary consulting firm; Lisa Roth, CEO of Keystone Capital and president of law firm Monahan & Roth; and David Tittsworth, executive director of the Investment Adviser Association.

Paul Menchaca: What does smart regulation mean to you?

Tracy DeWald: We have what we call a risk-based approach to regulation. Regulators have used that phrase for years. It means don't just go down and check the box. Actually try to quantify and identify risks. It's the old adage of save your powder for what's important and really spend your time and energy focusing on high-risk type activities, products and advisors with track records.

What we're seeing today in the post-Madoff world is a regulatory community so afraid it might miss something that there seems to be analysis by paralysis. Regulators are not making any subjective decisions as to what's a risk, what's important and what's material because they're afraid they might miss something. They're just getting overwhelmed with the minutiae.

Lisa Roth: I agree with that in many respects. I think that smart regulation actually accomplishes investor protection or gets at that goal as a priority rather than the ticky-tack detail approach. And I also think it's important that smart regulation doesn't allow for any significant arbitrage between broker-dealers and advisors. I would add that rule making has to take into account the size and complexity of the firm.

I was so stoked when right after the NASDAQ/NYSE merger they began to talk about principles-based regulation and a tiered rule book. And, of course, in this post-Madoff world, all this has fallen by the wayside. And now Congress is involved.

Marilyn Capelli Dimitroff: Piggybacking on that, another very important issue is regulation that addresses public confusion. We have such a patchwork quilt-such a glommed-together approach-that consumers are just incredibly confused. The investors don't understand the distinction between, for instance, broker-dealer and investment advisor; between the different ways that advice is delivered, between the different responsibilities, the different competencies, all of that.

I chaired the CFP Board last year and I'm still part of the Financial Planning Coalition. An area that has concerned us is the fact that virtually anyone can say they're a financial planner. There are no standards. So we've proposed a financial planning oversight board that would establish a level of competency and require a fiduciary standard for folks who say they do financial planning or who actually do financial planning.

David Tittsworth: I think smart regulation is regulating activities that are likely to cause harm, and doing so in an appropriate and effective manner. I think the missions of the SEC are right-protecting investors, maintaining fair and orderly markets, facilitating capital formation. But how the SEC or other regulators deal with those is not always consistent or admirable.

Kristina Fausti: As someone [who] worked at the SEC for almost five years, when I look at smart regulation I look at making sure that there is an overall efficiency and reliability of regulatory processes. One thing is making sure that your regulatory goals are clearly defined, but also clearly prioritized.

You want to make sure that regulation is comprehensive enough in terms of eliminating gaps and dead zones. We're always so reactive. There is a need to be proactive and for regulatory systems to be dynamic and forward-looking.

THE MADOFF EFFECT