From the January 2015 issue of Investment Advisor • Subscribe!

SEC Needs More Funding to ‘Solve’ Advisor Exam Deficiency

Reallocation of resources may help, but it won't solve the problem

While there “may be ways” that the SEC can reallocate its existing resources to accommodate a higher advisor exam rate, the SEC “cannot solve this [exam deficiency] problem without additional resources from Congress,” argued Barbara Roper, director of Investor Protection at the Consumer Federation of America.

Since the early 1980s, Roper said, SEC funding “has not begun to keep pace with the growth” in the SEC's responsibilities.

Indeed, SEC Chairwoman Mary Jo White said in November at the Securities Industry and Financial Markets Association's annual conference that the agency's budget is “always a challenge,” and that she would “continue to focus” on getting Congress to boost the SEC's funding in the new Congress.

Brian Hamburger, founder of the New Jersey-based Hamburger Law Firm and its affiliate MarketCounsel, which offers RIA compliance services, argued, however, that it's not the “industry's responsibility” to pay the SEC to conduct exams, as user fees would require. Hamburger doesn't see the odds favoring user-fees legislation moving forward.

Because the SEC has not been able to allocate more resources to advisor exams under its current budget, and with the likelihood that Congress will not provide the agency with more funding to do the job, Skip Schweiss, president of TD Ameritrade Trust Co. and managing director of advisor advocacy and industry affairs at TD Ameritrade Institutional, agreed that he doesn't see user-fees legislation “moving forward.” However, Schweiss said he will continue to be an advocate for such legislation.

The SEC, Schweiss added, should assess its exam's “efficiency”; instead of focusing time on making sure “all the I's are dotted and the T's are crossed, maybe you spend time making sure all the assets are there, are accounted for.”

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