FINRA Drops Bid to be SRO for Registered Investment Advisors, For Now

Over the last couple of years, FINRA has spent nearly $5 million lobbying to become the primary regulator for registered investment advisers (“RIA”). However, Richard G. Ketchum chief executive of FINRA has stated that FINRA will no longer aggressively seek the appointment for now but FINRA is not giving up completely. Mr. Ketchum’s reasoning was that, “We’re realistic enough to know that there doesn’t appear to be any strong momentum to move forward in Congress, given other priorities.”

There is no doubt that part of what Mr. Ketchum is referring to is the fierce opposition that investment advisers and their lobbying organizations provided to the SRO bill last year. Without a strong proponent on Capitol Hill pushing the bill, FINRA will have a difficult time with becoming the new SRO for RIAs.

Mr. Ketchum’s statement seems to acknowledge this and imply that FINRA’s lobbying efforts will take a short pause until a more opportunistic political climate is seen. While many advisers will be excited to know that for now FINRA will not be the SRO, advisers should still understand that FINRA has positioned itself as the best choice to fill the SRO role, should the gridlock in congress be resolved.

With the SRO shifting its priority from SRO appointment to other regulatory topics, RIAs should expect more focus on areas such as broker-dealer conflicts, structured products and high-frequency trading. For additional information about this topic or any other compliance topic, please contact Andrew Deddeh at (619) 278-0020 or andrew.deddeh@corecls.com.