Investment advisers, state regulators and consumer advocates were astonished by the easy adoption of a key addition to the Investor Protection Act that would give Finra power to oversee any adviser associated with a registered broker-dealer, including about 500 dually registered Finra members.

That amendment, which the House Financial Services Committee approved last Wednesday by a voice vote, would give the Securities and Exchange Commission the authority to allow the Financial Industry Regulatory Authority Inc. to expand its oversight of brokers’ registered investment advisers.

That would cover a major chunk of the investment advisory business.

“Finra is not the appropriate regulator for overseeing advice,” said Richard Salmen, president of the Financial Planning Association. “Finra is about sales products, about sales practices, [and] dealing with salespeople. That’s a totally different culture than a fiduciary-based advisory practice.”

Mr. Salmen is also senior vice president of GTRUST Financial Partners, which manages about $400 million. (How much authority, in your view, should Finra have over advisers? Weigh in here.)

“We were shocked that the amendment was considered,” said Texas Securities Commissioner Denise Voigt Crawford, who is president of the North American Securities Administrators Association Inc.

David Tittsworth, executive director of the Investment Adviser Association, which opposes Finra regulation of advisers, said, “We’re going to be working to try to convince people this is a very, very bad idea.”

The amendment, which was offered by the committee’s ranking Republican member, Rep. Spencer Bachus, R-Ala., was passed with little debate at the end of the committee’s consideration of the Investor Protection Act. No roll call vote was requested.

The full bill, which also establishes a single fiduciary standard for advisers and brokers who provide personalized investment advice to retail clients, is expected to be approved by the committee on Wednesday and will then go to the full House for approval.

“The disparity in regulatory regimes between broker-dealers and investment advisers leaves investors without a critical layer of protection,” said Nancy Condon, a Finra spokeswoman. “We support Congress closing the regulatory gap.”

To read the full version of this story, please see the Nov. 2 issue of InvestmentNews