SEC Gets a Hand in Brokerage Oversight

Brokerage oversight is getting a fresh pair of eyes

This week, the Securities and Exchange Commission (SEC) indicated that it would be calling on a need for more oversight from its financial regulation partner, the Financial Industry Regulatory Authority (FINRA). The decision to shift responsibility comes with an SEC initiative to devote more energies towards the rise of independent financial advisers. New business models offering greater independence and variety of investment services have led to an increase in the registration of investment advisers. Since this increase, the SEC has been criticized for lack of oversight, managing to examine only 10 percent of new investment adviser registrations per year. The SEC is increasing their investment adviser oversight an extra 20 percent to meet the growing number of independent advisement services. As the SEC’s new focus will take examiners away from the Wall Street sector, it says it will need FINRA to step up their efforts to brokerage oversight. While the SEC won’t be entirely removed from brokerage oversight, FINRA seems to be handling the shift well. On Tuesday, Reuters reported that FINRA had fined Bank of America’s Merrill Lynch $2.8 million for record-keeping and trade reporting violations. FINRA is an independent, financial regulatory organization. It is a privately-funded organization but it seems committed to it’s self-regulatory purpose. In regards to the Merrill Lynch fine, FINRA head of market regulation reiterated that accuracy of information reported by broker-dealers was critical for market integrity, according to the Reuters report. Regardless, the SEC wants to ensure that brokerage oversight will remain a priority. They will be keeping regulators focused on brokerage oversight in New York and Chicago, two of the largest brokerage sectors. They will also be overseeing FINRA’s efforts. Reuters reports that a group named FINRA and Securities Industry Oversight will monitor FINRA’s brokerage oversight examiners from offices in various major U.S. market sectors.