Yield of Dreams

Could We See an SRO Bill in 2013?

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Since his rant in a Wall Street Journal op-ed in early August, we haven’t heard much from Financial Services Committee Chairman Spencer Bachus (R., Ala.) on his controversial SRO (self regulatory organization) bill. But it doesn’t mean the fight for an SRO for investment advisors is over.

Of course, the future of any SRO bill depends on who becomes chairman of the Financial Services Committee next year, as well as how aggressive both sides come out swinging, said Duane Thompson, senior policy analyst for fi360.

“FINRA’s in it for the long term; they’re not going to give up that easily,” he told WealthManagement.com. “You’re going to see another rule come out.”

That said, FINRA has its work cut out for it.

“I think the expectations that it was going to have smooth sailing two years ago, when the issue first came up and Spencer Bachus was named chairman, are gone,” Thompson said. “There were a lot of alarms raised by the advisor side that this thing was a steamroller that was going to move through. Right now, FINRA would be setting up the SRO apparatus and advisors would be saying hello to their new regulator. But that obviously never happened.”

Bachus, to be sure, won’t be chairman of the committee next year, and he was the biggest proponent of an SRO. The money’s on Representative Jeb Hensarling (R., Texas), vice chairman of the committee. Hensarling hasn’t come out strongly on this issue one way or the other, Thompson said. A second option for chair could be Scott Garrett (R., N.J.), who isn’t crazy over SROs because of their cost and the lack of direct oversight by Congress.

Either way, there are no slam-dunks for FINRA, Thompson said.

Congresswoman Maxine Waters (D., Calif.) recently introduced the Investment Adviser Examination Improvement Act of 2012, which would provide funding to the SEC to boost its investment adviser oversight program, something the SEC staff initially recommended in Dodd-Frank reform.

Thompson said Waters’ bill does not have legs, however, because it’s from the Democrats, who will likely not control the House.

“Politically, at least, it serves as an answer to the Republican complaint, ‘Well what are going to do to avoid more Madoffs in the future?’”

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What's Yield of Dreams?

Casting a gimlet-eye on asset management issues.

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