As Congress Keeps SEC Budget Flat, SRO Specter Still Lurks

In addition to the continuing resolution’s flat funding, the coalition says the SEC would face even more pressures if mandated cuts are enacted at the beginning of next year through sequestration. The coalition cites a report by the Office of Management and Budget (OMB), which says sequestration would force cuts of $117 million to the SEC, reducing its budget by more than 8%.

The coalition says it believes the SEC is more cost-efficient than, for instance, the creation of a new SRO under House Financial Services Chairman Spencer Bachus’ bill, “which independent studies have noted would substantially raise costs.”

Said the coalition: “Congress can approve the resources the SEC needs to enhance its mission of safeguarding investors, without costing taxpayers a penny. This can be done either by increasing appropriations to the SEC—the SEC is funded by industry transaction fees—or by authorizing the SEC to collect reasonable user fees from investment advisers.”

Rep. Maxine Waters, D-Calif., introduced in late July the Investment Adviser Examination Improvement Act of 2012, which would allow the SEC to collect user fees from advisors to fund their exams in lieu of an SRO.

Barbara Roper, director of Investor Protection at the Consumer Federation of America (CFA), told AdvisorOne in a previous interview that the Waters bill “demonstrates that there is a user fee alternative that can achieve broad support from various stakeholders.” However, “the real question is whether Congress will be able to break the logjam next year and adopt a bill that finally resolves this problem of inadequate investment advisor oversight.”