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FINRA's Announces Plan to Allow FINRA Arbitration for Investment Advisers

David P. Meyer

In Jan., the SEC submitted a recommendation to Congress that offered an expansion of the Financial Industry Regulatory Authority's (FINRA) powers of oversight to include some registered investment advisers as one method for improving the regulatory system. The suggestions for improvement were required by the 2010 Dodd-Frank financial reform law.

Yesterday, FINRA officials announced that the organization will "definitely offer dispute resolution to investment advisers" if Congress votes to expand its authority as recommended by the SEC, and that is now has a plan for how to do so ("UPDATE: Investment Advisers Could Arbitrate Through Finra Under New Plan," Dow Jones Newswires, Aug. 11, 2011).

The debate on whether or not FINRA should be allowed to expand its regulatory oversight to include investment advisers has been a long and heated one. Advocates for the expansion say that FINRA's new powers would streamline the arbitration process and make it more consistent. It also would likely help bolster the enforcement efforts of an expanded, but underfunded and severely resource-limited, SEC.

InvestmentNews, the industry's "leading news source for financial advisers," has said that the expansion of FINRA's oversight is "logical and offers the greatest hope of assuring that investors are protected from unscrupulous advisers, shady business practices and even from their own worst instincts."

Linda Fienberg, president of Finra's dispute resolution unit, said Wednesday that the new plan could be implemented within nine months of Congressional approval. Whether Congress will approve the expansion remains to be seen.

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