The FINRA Board of Governors met this week;  Chairman and CEO Rick Ketchum provided his take in a letter to member firm executive reps.  Here are pertinent parts of the letter:

The FINRA Board of Governors met this week to discuss a number of issues - one rulemaking item and 2 SEC studies released last month.

1.  Study on Enhancing Investment Adviser Examinations (1/19/11).   The SEC study clearly states that the SEC doesn't have the resources to examine investment advisers with adequate frequency and suggests that Congress consider several options to address this problem - 2 options would authorize an SRO (e.g., FINRA) to examine IA's.  FINRA would appreciate being that SRO. 

2.  Study on Investment Advisers and Broker-Dealers (1/22/11).   Here, SEC staff recommended creating a uniform standard of care for BD's and IA's that provide personalized investment advice to retail investors.  FINRA has long stated that the standard of care for brokers should be a fiduciary duty to act in the best interests of the customer without regard to the professional's financial or other interests. Dodd-Frank and the SEC study both recognize that application of a fiduciary duty must reflect the nature of the B/D business. 

3.  Concept Proposal on Client Disclosure.   The time's to step back and look at the way information is disclosed to customers.  There's a clear need for more Web-based, plain-English disclosure about conflicts and fees, and range of products.  It's a fundamental building block of single standard.  In October 2010, FINRA issued a concept proposal about the appropriate needs for disclosure.  Comments and FINRA recommendations will be discussed at an upcoming Board meeting.  

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Rulemaking Items Discussed at the February 2011 Meeting.

With regard to Third-Party Service Providers ...  the Board considered a new proposed rule addressing member firms' use of 3rd-party service providers.  The rule reinforces the requirement that, when firms use such service providers to perform its functions as a regulated broker-dealer, it nonetheless remains obligated to comply with all applicable securities laws, regulations and SRO rules.  The rule also would require a firm to have WSP's that, among other things, address its 3rd-party service provider arrangements, including due diligence procedures. 

For further details, go to:   [Update: FINRA Board of Governors Meeting, 2/4]