RJ and Makay

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Most financial advisors (FAs) oppose the annual "opt-in" reforms that have been proposed by the federal government and feel the reforms could damage clients' portfolios, suggest the findings of a recent survey. FAs believe opt-in reforms could impose more compliance burdens than they already have, the survey also shows.

New recommendations by the Securities and Exchange Commission (SEC) about how best to regulate investment advisors are widely seen as a "punt" since the SEC provided no definitive advice on the issue. Rather, in a recent study, it suggested Congress take one of three steps:

• authorize the SEC to impose user fees on advisors to bolster its examination and enforcement efforts;
• allow the commission to designate one or more advisor self-regulatory organizations (SROs); or
• grant the Financial Industry Regulatory Authority (FINRA) the power to examine broker-dealers who are dually registered as investment advisors.

The SEC recommendations, mandated by the Dodd-Frank financial reform law, illustrated that the frequency of advisor examinations by the Office of Compliance Inspection and Examination (OCIE) has declined over the last six years. In 2010, for example, OCIE reviewed 9% of the 11,888 investment advisors registered with the agency.