Registered Rep.: As newly appointed chair of the Financial Services Institute board (a trade group for independent b/ds), what's at the top of the agenda for 2009?
Eric Schwartz: We have four key priorities for the year: First, we are already working to influence the debate around regulatory restructuring of financial services. Any changes to the regulatory system should be done from the perspective and for the benefit of middle-class investors — not just Wall Street institutions. Second, we will continue to work to ensure that independent contractor IRS classification is maintained for independent financial advisors. Additionally, we are continuing our work with the SEC to gain clarity on the application of privacy rules under Regulation S-P. Finally, we are focused on influencing the FINRA rulebook consolidation process to create an outcome that minimizes additional onerous regulations for our members when they don't really move the needle in protecting investors.
RR: Is the next IBD consolidation wave rolling in?
ES: Out of any market downturn, some consolidation usually occurs. That said, we believe that the majority of independent broker/dealers today are in a relatively strong position. And from a market perspective, there are tremendous opportunities right now for independents to capitalize on the distrust and dislocation impacting the wirehouses.
RR: How will smaller independents manage larger scale compliance and regulatory burdens?
ES: We believe that the best way for independent broker/dealers of all sizes to address the coming regulatory changes is to get highly involved in the process.
RR: What does the Madoff scandal mean for the independent space?
ES: The Madoff scandal is a mind-boggling Wall Street failure that has undermined trust among clients everywhere. For independent broker/dealers and financial advisors, I think it exposes the shortcomings of the SEC, which was so focused on rulemaking by enforcement and examining issues of minutiae among independent broker/dealers that it ignored multiple warnings about an unprecedented financial scandal. We believe there is also an opportunity for FSI and our members to work constructively with the new leadership of the SEC to bring about a regulatory restructuring that is transparent, effective and efficient.
