RIA Compliance Blog
The Project on Government Oversight (POGO), on May 29, wrote to Rep. Spencer Bachus (R-AL) and Rep. Barney Frank (D-MA) opposing the self-regulatory organization (SRO) bill that was reintroduced in the House of Representatives in April. We discussed the bill in a previous post, SRO Redraft Bill Reintroduced. POGO joins a long list of groups, including the Investment Advisers Association, the Financial Planning Coalition and the American Institute of CPAs, opposing the bill. POGO is particularly opposed to the Financial Industry Regulatory Authority (FINRA) becoming the SRO because it believes that “FINRA’s regulatory effectiveness is undermined by its inherent conflicts of interest, its lack of transparency and accountability, its lobbying expenditures, and its executive compensation packages, among other issues.”
The letter addresses each area of concern POGO has relating to FINRA becoming the SRO for investment advisers. First, POGO states that FINRA’s “conflicted mission” will lead “to cozy ties with the industry.” POGO says the conflict arises because FINRA collects fees from member firms and is also charged with regulating the investment adviser industry. POGO believes that FINRA’s “inherently conflicted self-funding model has contributed to an incestuous relationship between FINRA and the industry it is tasked with regulating.” In contrast, POGO contends that government agencies are not conflicted because they must comply with federal ethic laws and agency regulations designed to alleviate the conflicts.
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