Tom Bradley President, TD Ameritrade Institutional
Registered Rep.: Should the SEC oversee investment advisors, or FINRA or a separate self-regulatory organization?
Tom Bradley: What we have to beat the drum on is, we don't need more regulation, we need better regulation. Let's make sure we are auditing as efficiently and effectively as we can, that we're looking for the right things. FINRA and SEC both missed Madoff; Madoff was audited by both.
Jim Angel, a Georgetown finance professor, did a paper we funded. He said, “Why don't we look at turning this over to accounting firms? Let's put this out for competition.” I thought that was a great idea. But in the meantime, the SEC does seem to be taking the steps to improve their examination process.
RR: Would you be worried about FINRA being the SRO?
TB: I'm Switzerland on this. It's our advisors that don't want FINRA. I was on record saying, “For the advisors that are dually registered, FINRA is already going in there. Why don't you test it out with having them audit both sides?”
RR: Why don't advisors want FINRA?
TB: Independent registered investment advisors view the brokerage industry as their competition. They view FINRA as being very closely tied to their competition. “Why would I want to be audited by my competition?” They're also concerned about excessive fees.
I think an advice-giver needs to pick sides. So if you're a broker, and you're operating under the Securities Act of 1934, which legally deems you to be a salesperson, but you're essentially providing services like a fee-based RIA, just drop your sales licenses and become an RIA. You don't even have to be independent. Do it under your firm's RIA.
Pick a side. There's nothing wrong with being a salesperson. Let people know, “I'm a salesperson, I sell new issues, secondaries, and that provides a very valuable role in our society.”