August 2, 2010
I believe the most important way of crafting a regulatory structure to address the needs of the marketplace is to look at the marketplace from the standpoint of the client, as that is the individual who everyone is trying to best serve and best protect.
From the standpoint of the client, it is not a terribly important point whether his advisor is a registered representative from a broker/dealer or an investment advisor representative from an RIA. For that individual customer, that client, the person coming and providing suggestions as to what he ought to do is his financial advisor.
As such, I believe we need more uniformity in the way in which advisors are permitted to work with clientele. Registered Representatives are 100% subject to the rules and regulations of the SEC and FINRA. And as such are required to undergo significant study and pass at a very minimum the FINRA Series 6 examination to be permitted to represent any products at all to an individual client. Further, a broker/dealer is subject to periodic examination and review by highly trained representatives from FINRA, who will mandate the manner in which the broker/dealer is to oversee and regulate the individual representatives registered with it. There are significant volumes of rules and regulations for each and every representative to comply with and each and every representative is being examined on a regular basis and sanctioned where necessary to ensure compliance. Now conversely, an Investment Advisor usually has no agency coming to examine anything at all about his business. Certainly he has extensive rules and regulations with which he is required to comply however, if he is not working for an RIA in a state which is going to be providing regular examinations and ensuring compliance, it is unlikely that he will ever be subjected to such exposure. Although the SEC is head over all of the nations investment advisors, only FINRA has the logistical capacity of establishing rules and regulations, and a system of examinations to oversee this business.
In summation, the nation has a very large number of investment advisors talking to the public without proper educational background and without proper oversight. In the best interest of serving our public fairly, the system must be adjusted so that an IAR and an RR receive comparable and equal training and oversight.