While all bets are on Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, introducing a bill this fall to require one or more self-regulatory organizations (SROs) for advisors, it’s important to note that any SRO bill that’s introduced—and eventually passed—in the House must be approved by the Democratically controlled Senate Banking Committee.
And it looks as though Senate Banking Committee Chairman Tim Johnson, D-S.D., may not be ready to approve the SRO route just yet. As a Senate banking committee spokesperson told me on Tuesday, Johnson believes the SRO issue “deserves further exploration before moving forward with any legislative proposals.”
Investment advisor regulation was raised during a hearing on investor protection issues held by the Senate Banking Committee in July, but Johnson’s committee has yet to announce when, or if, a specific hearing would be held on the SEC’s study regarding putting brokers under a fiduciary mandate or an SRO for advisors.
During an interview with AdvisorOne in May, Johnson noted that the SEC’s report under Section 914 of Dodd-Frank regarding an SRO for advisors “raised a number of important concerns.” While admitting that “conclusions either way at this point would be premature” as to whether an SRO is needed for advisors, the Senator promised that he would “be monitoring this issue carefully.”
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Senator Johnson has been a staunch advocate for more SEC funding, but Bachus just warmed up to idea last week—mainly because he sees that more funding would help the SEC with its oversight of any advisor SRO. During comments at the Sept. 15 hearing he held on SEC restructuring, Bachus specifically asked a question about the significant duties related to SEC oversight of SROs.
Says Kristina Fausti, general counsel with fi360: Bachus “understands that funding [for the SEC] might be needed to assist with oversight of any advisor SRO and therefore he could continue down a path of introducing his SRO bill while also making sure that the SEC gets the funding it needs to properly oversee the SRO.”