More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Rep. Maxine Waters’ user-fees bill is gaining traction in the House.
Former House Financial Services Committee Chairman Rep. Spencer Bachus, R-Ala., agreed Thursday to co-sponsor H.R. 1627, the Investment Adviser Examination Improvement Act of 2013, which would allow the Securities and Exchange Commission to collect user fees from advisors to help boost the number of advisor exams.
Waters’ bill has been languishing in the House with no Republican support since she reintroduced it last April.
Two additional Democratic members of the House Financial Services Committee, David Scott, D-Ga., and Steven Horsford, D-Nev., also signed on as co-sponsors the same day, bringing the total number of co-sponsors from the committee to 20.
Waters, D-Calif., the ranking member on the House Financial Services Committee, said in a Thursday statement that “In the past, Mr. Bachus and I have worked closely on the issue of international debt relief benefiting the most vulnerable. Today, we are working together to protect the savings of hardworking Americans, in strong agreement that the SEC needs to police those who provide investment advice more often. And the best way to do so is by funding those additional exams through fees on these advisors.”
Bachus is now chairman emeritus of the House Financial Services Committee. He said in a Thursday statement that considering the widespread acknowledgment after the Bernie Madoff and Robert Allen Stanford scandals "that the oversight of financial advisors needed to be improved," and improving advisor exams "would serve to benefit the good actors in the industry, who by far are the overwhelming majority, and help to enhance investor confidence. There have been various proposals to conduct more frequent examinations, but the important thing is to have a better system to stop potential fraud.”
The fees assessed on advisors under Waters’ bill would be dedicated to adding staff to the SEC’s Office of Compliance Inspections and Examinations.
On July 11, Waters called on Committee Chairman Jeb Hensarling, R-Texas, to convene a hearing of the full committee to consider various legislative proposals that would increase the levels of advisor exams.
Waters’ office said Thursday that Hensarling has not yet responded to her request.
However, when asked Wednesday after his remarks at an event held by the Cato Institute and the Mercatus Center at George Mason University whether he would hold such a hearing, Hensarling responded: “I intend to give the request the attention it deserves,” then declined to clarify his response.
The Investment Adviser Association called Bachus’ support of Waters’ user-fees bill “significant,” as Bachus sponsored legislation in the last Congress, which was supported by the Financial Industry Regulatory Authority and opposed by IAA – that would have subjected advisors to the authority of a self-regulatory organization.
The timeline to hold a hearing on advisor exams is limited, given that Congress will soon adjourn for a monthlong August break.
But David Tittsworth, IAA’s CEO, said in an email message that Bachus’ support for Waters’ user-fees bill, as well as the recent recommendation from the SEC’s Investor Advocate calling on Congress to enact the user-fees bill, “may help spur bipartisan efforts [regarding user fees legislation] in both the House and the Senate in the future.”
Tittsworth added that he "strongly" believes that a hearing on advisor exams could be conducted in the next Congress. "The issue of investment advisor oversight will not just go away quietly," he said. "Something needs to be done – and the user fee bill is the best option to address these issues once and for all."
The Financial Planning Coalition--comprised of the CFP Board, the Financial Planning Association and the National Association of Personal Financial Advisors--agreed in a statement that Bachus' and other members of Congress' support for Waters' bill "demonstrates that investor protection is not a partisan issue, and we expect to see the number of co-sponsors on both sides of the aisle continue to grow."
--- Check out GOP Blocks SEC User Fees From Spending Bill on ThinkAdvisor.