Industry trade groups and consumer advocates opposed to House Financial Services Committee Chairman Spencer Bachus’ bill calling for a self-regulatory organization (SRO) to oversee advisors had their hopes quashed on Wednesday that the Securities and Exchange Commission (SEC) would receive a boost in funding in order to thwart an SRO.
During a hearing on Wednesday to discuss Bachus’ bill, H.R. 4624, the co-sponsor of the bill, Rep. Carolyn McCarthy, D-N.Y., stated frankly: “Would I like to get more money for the SEC? Yes, I would. But we are not going to get the money for the SEC; it’s not going to happen.”
However, Rep. Maxine Waters, D-Calif., stated at the hearing that she is drafting legislation that would allow the SEC to collect user fees to help fund advisor exams.
A day before the SRO hearing, the House Financial Services General Government Appropriations Subcommittee allotted $1.37 billion to the SEC for fiscal year 2013—$195 million below President Obama’s request—and an amount that industry officials agree will starve the SEC of the necessary funding to boost oversight of advisors.
The SEC requested $1.57 billion for fiscal 2013, an increase of $245 million above the agency’s fiscal 2012 appropriation.
Rep. Barney Frank, D-Mass., ranking member on the Committee, argued that Congress “can afford to increase the relatively small amount” of funding the SEC asked for.
However, Bachus countered that while some have argued more SEC funding “is the answer” to increasing advisor exams, the “SEC itself has admitted that even if the agency receives the full amount” it requested in FY 2013, the securities regulator “would be able to examine only one in 10” advisors.
While the bulk of those testifying were in favor of Bachus’ bill, the Investment Adviser Oversight Act of 2012, Bachus stated during his opening remarks that he “stands ready to work with anyone who has an idea on how to improve” the bill. The “only goal” of the bipartisan legislation “is to deter bad actors and help protect American investors,” he said. “I see no way to do that without timely examinations.”
Bachus went on to say that “We want to do what’s right. We don’t want to unnecessarily burden advisors, but at the same time they need to be examined.” Addressing lawmakers and those testifying, Bachus added that “We are all open to seeing that [an SRO is] not overbearing. This is not a markup, this is a hearing.”
A markup on the bill was expected to occur on June 28, but industry officials attending the hearing speculated that date could be pushed off until fall.
The bulk of those testifying were in favor of Bachus’ bill, which would authorize one or more SROs to oversee advisors—with all endorsing the Financial Industry Regulatory Authority (FINRA) as the preferred candidate. The supporters noted that the bill is a “good starting point” in addressing the gap in regulation that currently exists in advisor oversight.
Those supporting Bachus’ bill, the Investment Adviser Oversight Act of 2012, were: Dale Brown, president and CEO of the Financial Services Institute; Thomas Currey, past president of the National Association of Insurance and Financial Advisors (NAIFA); Chet Helck, CEO of the Global Private Client Group for Raymond James, who testified on behalf of the Securities Industry and Financial Markets Association (SIFMA); and Richard Ketchum, chairman and CEO of FINRA.