Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, January 13, 2011

SIFMA Supports Comparable Regulatory Oversight of Brokers, Investment Advisers

SIFMA submitted a comment letter (Download 2011-SIFMA-commentletter-DFsection914study[1]) to the SEC urging that the SEC recommend to Congress a regulatory structure that would provide comparable oversight and examination of both brokers and investment advisers when providing personalized investment advice to retail customers. 

In the letter, SIFMA noted that Section 913 of the Dodd-Frank Act emphasized that all intermediaries (brokers and investment advisers) providing personalized investment advice to retail customers should be held to a comparable standard of care, whether they are registered investment advisers (RIAs) or broker-dealers and that an important component of holding these intermediaries to a comparable standard of care is ensuring effective oversight of these activities.   According to SIFMA,

Most retail RIAs that are not affiliated with a broker-dealer are small independent advisers that, apart from their RIA status, are not otherwise subject to Commission enforcement.  Due to the small size of these RIAs, many do not have substantial legal and compliance departments to monitor for compliance with applicable regulatory standards.  Additionally, these RIAs are not regularly examined by the Commission today.  Limited government resources for examining and monitoring independent RIAs also warrants an SRO with jurisdiction over independent RIAs and which would be able to devote sufficient examination and enforcement resources to protect investors.  

SIFMA also believes that any SRO examination program should be carefully tailored to investment adviser practices so to recognized and accommodate the divergent business models and historical regulatory regimes of RIAs and their associations with broker-dealers or other persons.  In addition, SIFMA believes that if more than one SRO is ultimately developed that could examine RIAs, business entities that have both broker-dealer and investment advisers in their corporate structure should have the option to select a single SRO to serve as their regulator.

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