Dodd-Frank Act May Mean More Oversight Duties for FINRA

Lora Bentley

It's clear that the Dodd-Frank Wall Street Reform and Consumer Protection Act will usher in a lot of changes. There will be new rules for derivatives trading, a new agency focused on consumer protection, a single fiduciary standard for all investment advisers... The list goes on for pages. But the new law could also mean that the Securities and Exchange Commission passes more oversight responsibility to the Financial Industry Regulatory Authority.

 

Investment News reported Friday the new law requires the SEC to "harmonize" the different standards of care that apply to broker-dealers and to other investment advisers - if necessary. But since SEC Chair Mary Schapiro is already on the record in support of a single fiduciary standard and other responsibilities arising out of the new law have placed considerable "constraints on the SEC's budget and time," it's likely that FINRA will end up overseeing all investment advisers.

 

Kristina Fausti, director of legal and regulatory affairs at Fiduciary 360, told Investment News:

Given that FINRA already has rules and enforces them, I don't see how it does not play a role in oversight and enforcement of the fiduciary duty for broker-dealers.

The basis for extending FINRA's oversight may be found in section 914 of the Dodd-Frank Act, the story says, which allows the SEC to recommend that Congress designate a self-regulatory authority to "bolster" the SEC's supervision efforts.

 

Understandably, reaction to the news is mixed. One reader commenting on the story said simply,"Say it ain't so!" On the other hand, another said: "One standard, one regulator. Makes sense."



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