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Trust and the Investment Adviser Industry: Congress’ Failure to Realize FINRA’s Potential to Restore Investor Confidence

34 Pages Posted: 21 Aug 2010 Last revised: 27 Apr 2016

J Koebel

University of North Carolina Wilmington

Date Written: November 5, 2010

Abstract

Congress’ passage of the Wall Street Reform and Consumer Protection Act was, among other things, supposed to be an effort to reform the financial services regulatory structure, including that of the investment adviser industry.

However, by preserving the SEC’s status as sole regulator of investment advisers, the Act fails to adequately address the importance of investor confidence and instead threatens to preserve the status quo in an industry that has time and again betrayed investors. The SEC’s recent missteps in the midst of the financial crisis necessitate organizational change in the regulation of investment advisers. Just as the SEC was born out of the market crash of 1929, this crisis of confidence calls for a response that actively culls a perception of a trustworthy and accountable infrastructure. By examining the role of trust in economic activity, the critical impact of self-regulatory organizations on investors’ trust in the securities industry becomes apparent: FINRA’s oversight authority must be extended to encompass the investment adviser industry so as to restore trust in the securities regulatory infrastructure, lest investors fail to regain the confidence needed for long-term financial recovery.

Keywords: Securities, Investment Adviser, FINRA, SEC, Dodd Frank

Suggested Citation

Koebel, J, Trust and the Investment Adviser Industry: Congress’ Failure to Realize FINRA’s Potential to Restore Investor Confidence (November 5, 2010). Seton Hall Legislative. Journal, Vol. 35, p. 61. Available at SSRN: https://ssrn.com/abstract=1661486

J Koebel (Contact Author)

University of North Carolina Wilmington ( email )

601 South College Road
Wilmington, NC 28403
United States

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