Financial planning trade groups have written a letter to congressional leaders protesting an amendment that would extend the regulatory authority of the Financial Industry Regulatory Authority to cover investment advisers who are associated with broker-dealers under FINRA authority.

The letter was addressed Tuesday to leaders of the House Financial Services Committee, including Chairman Barney Frank, D-Mass. The committee approved the amendment by voice vote on Oct. 25 during the markup of the Investor Protection Act of 2009.

The amendment, known as Bachus 001, named after ranking member Spencer Bachus, R-Ala., would extend FINRA’s authority to help address the fallout from the financial crisis and scandals such as the Bernard Madoff fraud. However, the leaders of the Financial Planning Association, the Certified Financial Planner Board of Standards, and the National Association of Personal Financial Advisors believe the amendment goes too far and wrote to protest the legislation.

“The expansion of FINRA’s authority under Bachus 001 is without precedent and the impact of this new oversight structure is significant,” they said. “For the first time, FINRA would be granted authority to regulate people and practices outside the scope of the Securities Exchange Act of 1934. The members and stakeholders of our respective organizations are very concerned about how this new oversight structure will affect their businesses, their clients and the very nature of the industry.”

They said they believe the SEC is "far more appropriate" as a regulator for advisers, and they believe that the increase in the SEC’s budget under the main bill would render FINRA oversight "redundant and unnecessarily expensive and burdensome."

They also complain that FINRA is a self-regulatory organization comprising broker-dealers and would be inclined to bring a broker's perspective to adviser regulation. "This conscious or subconscious conflict of interest could result in a broker bias in FINRA oversight of advisers, and otherwise deepen the differences in how broker-associated advisers are regulated versus independent advisers," they wrote.

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