A leading consumer advocate broke ranks earlier this year with the CFP Coalition by supporting an organization such as FINRA to regulate financial advisors. But
The change of heart by Barbara Roper, director of investor protection at the Consumer Federation of America and a longtime ally of the FPA, CFP Board and NAPFA on the issue, stunned many on both sides of the debate. After two decades advocating for increased oversight to no avail, Roper said she had decided that some increased oversight via an SRO would be better than nothing.
“Unfortunately,” writes Roper, the proposed legislation “does not meet the standard of an appropriately designed SRO. Its central problem is the numerous exemptions it provides for various groups of investment advisers.”
Roper announced her revised position in a letter addressed to one of the bill’s cosponsors, House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and ranking committee member, Barney Frank (D-Mass.). The bill is co-sponsored by Carolyn McCarthy (D-N.Y.).
The bill exempts some of the wealthiest advisors from any SRO oversight, Roper contends. These include advisors with assets under management in charitable funds, hedge funds, retirement plans, mortgage pools, investment advisors and broker-dealers, and individuals with at least $5 million in investments.
“One result,” she writes, “is that … [without] the ability to spread a portion of those costs to larger, wealthier firms, the costs for small firms could be considerable.”
She further adds that, “the same disparity that currently exists with regard to oversight of brokers and investment advisers would be perpetuated between one class of retail advisers and another under this bill. This would likely be even more confusing for investors than the current system.”
In an interview, Roper said she also questioned the House Financial Services Committee’s commitment to true debate on the matter given that three out of six of the witnesses slated to testify hail from the B-D community. Tellingly, no representative from the FPA, CFP Board or NAPFA is slated to answer questions from members of Congress tomorrow. A list of witnesses and information about the debate, which can be viewed via live webcast starting at 10 a.m. EST tomorrow, is
“It seems like a strange imbalance for me,” Roper says. “I understand having one B-D witness. They have a relevant point of view. But I don’t think they have a point of view that is three times more relevant than the point of view of the parties that would be subject to regulation.”
One industry expert who supports the bill, and who declined to comment for attribution, said it is common for the majority party in either the House or the Senate to stack witnesses in such a debate in their favor.
“That’s just the way Congress works,” the expert said. “There’s nothing weird about that.”
Despite Roper’s opposition to the Bachus bill, the expert added, those in favor of it remain focused on the fact that she has changed her former longstanding opposition to any SRO.
“To us,” the expert said. “That’s the still the key.”
In the interview, however, Roper used strong language to condemn the Bachus bill formulation of such an SRO.
“Unfortunately,” she said, “we seem to be in this position in which the only way an SRO is viewed as feasible is when you have all these exemptions that buy off these other groups. Then it’s not fair and it doesn’t solve the problem.” View the
