SIFMA today submitted a comment letter to the Securities and Exchange Commission (SEC) in support of the Commission recommending 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.
“Putting into place a regulatory regime that puts clients’ best interests first must also ensure there is comparable examination and enforcement of those providing personalized investment advice to individual retail investors,” said Ira Hammerman, senior managing director and general counsel at SIFMA. “SIFMA has long supported a uniform fiduciary standard of care for brokers and investment advisers that protects investors, preserves choice, and keeps costs low. Now, we are supporting the Commission’s efforts to develop an examination and enforcement structure that will oversee investment advisers for individual investors in a comparable manner to the current regulatory oversight of brokers.”
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. An important component of holding these intermediaries to a comparable standard of care is ensuring effective oversight of these activities.
Indeed, Section 914 of the Dodd-Frank Act required the Commission to conduct a study to “review and analyze the need for enhanced examination and enforcement resources for investment advisers’ and submit that report to Congress. As mentioned in the comment letter, those SIFMA members who, through their registered investment advisers, provide personalized investment advice to retail customers would be subject to the comparable examination and enforcement structure.
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.
Click here to read the full letter: www.sifma.org/issues/item.aspx?id=22972.