More On Legal & Compliancefrom The Advisor's Professional Library
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
Advisory industry executives and advocates descended on Capitol Hill Thursday to participate in the Investment Adviser Association’s annual lobbying day, with a focus on issues “that cut across all of our member firms,” says David Tittsworth, IAA’s president and CEO.
Those issues include not only boosting funding for the Securities and Exchange Commission so that it can increase advisor exams, but pushing members of Congress to support the Investment Adviser Examination Improvement Act of 2013, a bill sponsored by Rep. Maxine Waters, D-Calif., that would allow the agency to collect fees from advisors to fund their exams.
Indeed, Skip Schweiss, president, TD Ameritrade Trust Co., and managing director of advisor advocacy and industry affairs at TD Ameritrade Institutional, told ThinkAdvisor on Thursday before heading to the Hill that his “core message” to lawmakers will be to support Waters’ user fees bill. “We come up here [to the Hill] with a very unusual message: We welcome more regulation and more frequent examinations, and we’re willing to pay for it.”
The “great thing” about the user fees bill, Schweiss continued, is that the fees that would be assessed do not end up in the “general pot” at the SEC. Fees that advisors would pay “have to be earmarked to examine advisory firms.” The Waters bill “was well written in that regard.”
The current advisor exam cycle of once every 11 years “is not good for investors, and it’s not good for the advisory industry,” Schweiss said. “It needs to be resolved,” but “the question becomes how to do that, because it takes money.”
Neil Simon, vice president of government affairs for IAA, told ThinkAdvisor on Thursday that while IAA members will be voicing their support for Waters' user fees bill, "action on the bill in the House does not look likely." That's why IAA and a fairly broad coalition of advisory groups, Simon said, still remain focused on getting a bipartisan bill that mirrors Waters' bill introduced in the Senate.
"The best opportunity to get [a user fees bill] enacted into law is a bipartisan bill in the Senate," Simon said.
Indeed, with little likelihood that Congress will boost the SEC’s budget enough to increase advisors’ exam cycle and with Waters’ bill having stalled, Schweiss said SEC Commissioner Daniel Gallagher’s recent suggestion to fix the exam imbalance by allowing third-party advisor exams “merits discussion.”
While Tittsworth agreed in a Monday letter to Gallagher that third-party advisor exams are “worthy of debate,” he suggested that a better solution would be for the agency to “reallocate” its resources to support more advisor exams.
There are “a lot of questions about what Gallagher has proposed,” Tittsworth told ThinkAdvisor Thursday.
Knut Rostad, the founder and president of The Institute for the Fiduciary Standard and the regulatory and compliance officer at Rembert Pendleton Jackson, says that he believes “IAA has gotten a toehold on the Hill and is far more recognized now.”
Indeed, Schweiss concedes that while Waters’ user-fees bill “faces an uphill battle” in this Congress, the advisory industry “did have a significant impact” on convincing lawmakers not to support the bill that former House Financial Services Committee Chairman Rep. Spencer Bachus, R-Ala., floated, which would have basically appointed the Financial Industry Regulatory Authority as the self-regulatory organization for advisors.
Check out IAA to SEC: To Boost Advisor Exams, ‘Reallocate Resources’ on ThinkAdvisor.