Trust and the Investment Adviser Industry: Congress’ Failure to Realize FINRA’s Potential to Restore Investor Confidence
University of North Carolina Wilmington
November 5, 2010
Seton Hall Legislative. Journal, Vol. 35, p. 61
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.
Number of Pages in PDF File: 34
Keywords: Securities, Investment Adviser, FINRA, SEC, Dodd Frank
Date posted: August 21, 2010 ; Last revised: April 27, 2016