Rick Ketchum last gave a speech in May 2010, but he still manages to express his opinions - e.g., the SEC should hand over oversight for investment advisers to FINRA.  That suggestion surfaced last Tuesday in a FINRA Comment Letter to the SEC.  [C-I Note:  You may recall FINRA pressing that position earlier in the year while Congress debated the Dodd-Frank Reform Act.]  His 9-page letter summarizes recommendations he and other Finra execs made to SEC staff at a meeting on 10/6/10.

The meeting and comment letter relate to a study the SEC is conducting, as required by Section 914 of Dodd-Frank.  Specifically, the Act requires the SEC to study the frequency of its RIA exams and whether one or more SROs can bolster the agency's efforts.  It's common knowledge that most advisers never see an SEC examiner or do so every 10 years, or so. 

Per Mr. Ketchum, FINRA is an antidote to the SEC's "funding limits," which have effectively prevented the Commission from conducting enhanced examinations of investment advisers on its own.  Mr. Ketchum stopped short of recommending FINRA for the job, but he makes it clear that "FINRA's programs provide a significant complement to the [SEC]'s investor-protection efforts through a broad array of programs...."

Mr. Ketchum specifically noted, the following:

• Insufficient resources has been a problem for years, will continue to be a problem.
• New SEC responsibilities under Dodd-Frank mean that existing resources "are unlikely to be sufficient to improve the frequency of investment adviser examinations,"
• An SRO, operating under the SEC's oversight, would be "the most practical way to address this resource problem."
• More than half of B/D's are examined each year by the SEC and FINRA, but the SEC examines only 9% of RIA's. 
• "FINRA does not believe that it would be appropriate or in the public interest to impose a broker-dealer-like fiduciary regime on investment advisers."

The ICI (Investment Company Institute) trade group objects to an SRO for investment advisers, citing concerns about examination quality, among other things.  Reliance on a self-regulatory organization would mean fewer SEC examiners "on the ground," wrote ICI General Counsel Karrie McMillan;  Outside examiners would "lack the benefit of internal knowledge" of the agency's goals.

The Washington-based trade group, IAA (Investment Adviser Association), cites the SEC as the most appropriate regulator for RIA's because "it is directly accountable to Congress and the public," and it urges "the Commission to avoid equating frequency of examinations with quality of oversight."  WSJournal, 11/8]