Independent broker/dealers and RIAs should be operating under the same fiduciary standard of care when dealing with investors, said Richard Ketchum, chairman and chief executive officer of the Financial Industry Regulatory Authority (FINRA) in a speech Friday.
Speaking at the Fall Symposium of the National Association of Independent Broker Dealers, Ketchum continued to push FINRA’s message that it should be authorized to provide oversight to the investment advisory channel, especially in situations wherein intermediaries work for integrated, or dually registered, firms.
The rules regarding the standard of care vary between broker-dealers and investment advisors. “That can be a recipe for problems,” Ketchum said during his keynote luncheon address. “I do think it is important to have a single standard, and every decision and recommendation should be in the best interest of the customer.”
During remarks afterward, Ketchum said once again that he hopes that FINRA will be delegated to provide oversight to investment advisors, especially when they are part of integrated firms.
Ketchum said that ever since he took command of FINRA last spring, he has traveled to various district offices and member offices around the country, trying to get a sense of what concerns its membership the most. And one of the biggest concerns, he said, is the compliance examination process, and that examiners are inexperienced or unprepared for their jobs.
Although saying that he would love FINRA to be more focused and attentive to those issues, Ketchum reminded attendees that federal regulation will have the most impact, potentially, on their daily lives. “We are in the midst of an extraordinary time from the standpoint of financial reform and legislation,” he said. “This is truly ‘game on.’” He noted that the House Financial Services Committee voted Thursday to create the Consumer Financial Protection Agency, meant to have broad authority to police consumer products and services, such as credit cards, and mortgages, regardless of whether they are offered by banks or other types of companies.
Looking longer term, Ketchum said, uniform safeguards on consumer financial products should be extended to all types of investment products. He also said that every intermediary should be tested, qualified and licensed; advertising should never be misleading; every product recommended should be appropriate for that investor; and investors should have full disclosure in plain English that explains the potential risks of the investment products they are buying.