Congress Urged to Preserve States' Authority in Any SRO for Advisors

Just as Steve Irwin, Pennsylvania Securities Commissioner and chairman of the Federal Legislation Committee for the North American Securities Administrators Association (NASAA), was warning members of the House Financial Services Capital Markets Subcommittee at a hearing on Tuesday to not trump states’ authority in potentially requiring a self-regulatory organization (SRO) for advisors, the newly christened NASAA president was beating the same drum miles away.

In testimony before the House Financial Services Committee’s Capital Markets Subcommittee, Irwin told lawmakers that NASAA remains “vigorously” opposed to the creation of an SRO for advisors. NASAA’s “primary position” regarding investment advisor regulation, Irwin told lawmakers, “is that it should continue to be the responsibility of state and federal governments, and that these regulators must adequately carry out their responsibilities.”

Investment advisor regulation, he continued, “is a governmental function that should not be delegated to a SRO. Even if Congress adopts a SRO model, state securities regulators and the SEC must be maintained as the primary regulators of investment advisers.”

The Financial Industry Regulatory Authority (FINRA), which was the only SRO option discussed at the hearing, “should be answerable to the appropriate government regulators, not the other way around, as both a legal matter and as a matter of fact.”

Rep. Spencer Bachus (left), R-Ala., chairman of the full House Financial Services Committee, conceded at the hearing that if lawmakers are able to come to a “bipartisan agreement” on an SRO “there would have to be protection for state regulators and enhanced oversight over FINRA.”