Posted in: Capitol Hill | FINRA |
I bet most people don’t know that at as a private association, FINRA is allowed to lobby Congress. This year the country’s largest regulator of broker-dealers will spend an estimated $1 million to lobby for what they call “financial regulatory reform,” according to investmentnews.com.
FINRA are seeking more authority over broker dealers, at a time when Capital Hill is deciding exactly how to reorganize financial regulatory responsibilities in the wake of the Bernie Madoff scandal.
Under Congress’ proposed Investor Protection Act, there would be a universal fiduciary standard for all broker-dealers and investment advisers. Basically, anyone who gives financial advice would be subject to the rules, unlike the present system.
There is also an amendment to that same bill, which if approved would hand that regulatory responsibility right over to FINRA. Here is some more detail from the article, which can be read in its entirety here:
The amendment, offered by Rep. Spencer Bachus, R-Ala., the ranking Republican on the House Financial Services Committee, could give Finra great power, said Neil Simon, vice president for government relations of the Investment Advisers Association, which represents federally registered advisory firms.
Under the change, Finra could get control over advisory affiliates of broker-dealers as well as dually licensed individuals, Mr. Simon said. If that happened, Finra would have authority over firms with 80% of total assets under management at advisory firms, he said.
It might seem strange for a southern Republican senator, who should normally be promoting smaller government, pushing an amendment supporting increased financial regulation. Rep. Barney Frank of Massachusetts, the liberal Democrat who is the chairman of the Financial Services Committee, opposes FINRA’s lobbying efforts and says he will try to remove the amendment when the bill comes before the full House.
Actually, this is not strange at all. Finra is understandably perceived to be one of the weakest regulators. That’s why congressional friends of the financial industry would rather increase Finra’s authority than that of another agency, such as the Securities and Exchange Commission.
Other critics point out the fact that FINRA lost $586 million last year from poor investments. FINRA ended the year operating with a $100 million shortfall, at a time when they should have been training investigators.
Congress should reconsider whether it’s worth granting more responsibilities to a regulator with a spotty record, especially during an era rife with investment fraud.
At the moment, it appears as if FINRA at least has a small say in the shaping of future financial regulatory reform. It will be interesting to see how the final version of this Investor Protection Agency really does impact Wall Street.
