California RIA fires off a letter to Senator Bachus decrying FINRA as SRO pick

RIA Biz is highlighting a letter sent to Senator Bachus from Neil C. Hokanson regarding FINRA becoming an SRO for investment advisers.  Mr. Hokanson is the president of Hokanson Associates Inc., an RIA based in California with $440 million of assets under management.  A few of the highlights from the letter are as follows:

“I’m sure you are a busy man, so I will cut to the chase: Continued regulation by the SEC, or by a yet-to-be established SRO, is acceptable to the great majority of investment advisors — in fact, by a ratio of 4 to 1. Regulation by FINRA, however, is not an acceptable alternative.

The reasons are essentially twofold. One is that FINRA as an organization does not meet a professional standard acceptable to ethical advisors, while the second is that U.S. consumers would be poorly served by having the broker-dealer community regulate their primary competitor — independent advisors.

…FINRA not only missed Ponzi scammers Madoff and [R. Allen] Stanford (the SEC shares blame here), but it failed with respect to regulating firms in what should be its area of core competency, such as Bear Stearns, Lehman Brothers and Merrill Lynch.

Over the years, a better-informed American public has made a clear choice towards greater transparency and more consumer-friendly alternatives. [The letter then goes on to cite the trend in movement from the wirehouses and broker-dealers to the independent space].

…The broker-dealer model — not unlike FINRA itself — is rife with conflicts of interest and lack of clear disclosure of conflicts and fees faced by American consumers of financial advice.

In summary, not only is FINRA an anachronistic organization doing a poor job of serving the public welfare, but allowing FINRA to regulate its primary competitor industry — which has grown so rapidly on the basis of greater transparency, lower fees, more disclosure and fiduciary standards absent in the broker-dealer world — would result in a huge step backward for the U.S. consumer and for our country.”

Comments are closed.