FOR RELEASE:
July 17, 2007
CONTACT:
Brad White
Director of Public Affairs
202.449.6345
WASHINGTON, D.C… July 17, 2007… The Financial Planning Association® (FPA®) said today that the planned change of name by the NASD from Securities Industry Regulatory Authority (SIRA) to one that suggests broad oversight of the financial services industry is misleading to the public and should be withdrawn from consideration.
“The NASD, which stands for National Association of Securities Dealers, has a longstanding historical mandate to regulate broker-dealers and the organization’s merger with the New York Stock Exchange doesn’t change that core mission. A name that implies broader financial industry oversight might unintentionally mislead the public,” said FPA President Nicholas A. Nicolette, CFP®. “The ‘financial industry’ tagline for a regulator would appear to be a seal of good housekeeping that protects the public in areas of the financial service sector where the NASD has no oversight authority.”
NASD announced earlier this week that it was changing its planned name from SIRA to the Financial Industry Regulatory Authority, or FINRA. Other areas of the financial service industry in which the NASD does not have jurisdiction includes the mortgage, banking, credit union, trust and insurance industries, investment advisers, mutual fund companies, and the financial planning profession. In order to regulate other areas of the financial services industry, the NASD would need approval by Congress.
“At a time when consumers are confused over the identity of their financial advisor, the NASD has declined to embrace a fiduciary standard for its own regulated community – a standard that is welcomed by investment advisers in their client relationships,” Nicolette said. “As such, it would be inappropriate to adopt a misleading title for an organization that implies broader oversight authority of the new self-regulatory organization. ”
In a comment letter two years ago to the SEC defending brokerage regulation and Rule 202, an exemption from the Investment Advisers Act of 1940 that allowed brokerage firms to charge fees instead of commissions for advisory services, the NASD argued that “enactment of the Advisers Act and adoptions of Advisers Act rules by the [SEC] demonstrate that a general fiduciary duty cannot provide complete protection to customers.” Instead, it said “protections afforded broker-dealer customers are equivalent to, and in many cases exceed, those afforded to adviser customers.”
A federal court of appeals threw out the Rule in a March 30th decision. Nicolette said he is concerned that proponents of a single regulator for advice-givers could point to a pending SEC study as a reason for lumping brokers and advisers together under the NASD and its new name. “The RAND report will clearly confirm an overlap in advisory services offered by brokers and adviser,” Nicolette said. “But until the NASD accepts the commonly accepted fiduciary standard and disclosure rules of the Advisers Act as affording greater protection to investors than NASD rules, functional regulation of advisers should take place under adviser, not broker, rules.” Nicolette noted that the NASD stands to lose regulatory turf when Rule 202 is scheduled to be vacated under the court ruling on Oct. 1, 2007.
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