FINRA appears to be pulling back from its campaign to regulate  RIAs -- and advisors couldn’t be happier.

Richard Ketchum, chairman and chief executive of the self-regulatory organization, which oversees the U.S. brokerage industry, told Reuters he was bowing to political reality.

“I’m not a big believer in  beating a head against the wall,” Ketchum told  Reuters. “We’ll focus on things we can impact.”

FINRA spent much of the last couple of years lobbying to become the primary regulatory body for RIAs -- spending nearly  $5 million on lobbying since 2008, according to Reuters.

But Ketchum said that, in the wake of leadership changes as a result of the 2012 elections, it was unlikely that the House of Representative Financial Services Committee would move to overhaul the current regulation of registered investment advisors  through the Securities and Exchange Commission.

ADVISORS CHEER

Advisors, who have overwhelmingly opposed FINRA’s  efforts to become their regulator, reacted positively to the news.

FINRA’s decision  is “good news for consumers,” said Steve Lockshin,  chairman of Convergent Wealth Advisors and founder of Advizent, an industry organization that is advocating a new branding campaign for advisors. “Cost aside, a self-regulating organization is likely to fall short of the current highest standard of conduct that exists through SEC regulation.”

WARINESS REMAINS

Some of FINRA's opponents are staying vigilant, however. Ellen Turf,  chief executive of the NAPFA and a member of the Financial Planning Coalition -- which opposes FINRA's campaign to regulate RIAs -- said the coalition is “not backing off its position,” despite FINRA’s announcement. “ We don’t really know what FINRA’s ultimate game plan is and when they will step back up on [the issue].”

“We think it’s the right move to let the  investment advisor SRO issue rest at this point, given of the lack of consensus in Congress,” Turf added. “A solution that keeps oversight at the SEC is one that advisors highly prefer as well." 

One investor advocate was particularly skeptical.

"It would be good news if FINRA decided to cease such efforts," said David Tittsworth, executive director of the Investment Adviser Association. "I don’t think, however, that Mr. Ketchum’s remarks go that far.  Instead, he seems to be saying that FINRA recognizes the reality that Congress has other priorities, that the SEC has not been united on the issue, and that FINRA has determined that, for the time being, it may be more fruitful to pursue other initiatives. But Mr. Ketchum makes it clear that the issues have not disappeared."