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April 19, 2013 at 11:27 AM
Just days after SEC Commissioner Elisse Walter called on Congress to act immediately to fix advisor exams, Rep. Maxine Waters, D-Calif., ranking member of the House Financial Services Committee, introduced legislation Friday that would allow the SEC to collect user fees to fund advisor exams.
The Investment Adviser Examination Improvement Act of 2013 (H.R. 1627), Waters said in introducing the bill “answers a funding gap which has been largely responsible for the infrequency of investment adviser exams, and represents the simplest and most direct method for achieving the desired result: improved quality and quantity of these exams and another step towards restoration of public confidence in our markets.”
The previous version of the bill, the Investment Adviser Examination Improvement Act of 2012, died in committee.
As Walter told state securities regulators Tuesday, the switching of advisors from SEC to state oversight under the Dodd-Frank Act is not “the final answer” to ensuring advisors are adequately examined.
Walter added in her comments to reporters after her remarks at the North American Securities Administrators Association’s public policy conference that the inability to adequately examine advisors was “the most pointed deficiency” at the SEC.
While President Barack Obama’s recent budget request would allow the SEC to hire an additional 250 examiners specifically for advisors, Walter told reporters that number wouldn’t be enough to sufficiently boost the number of advisor exams—a paltry 8 percent of advisors get examined each year.
Rep. John Delaney, D-Del., a member of the House Financial Services Committee and an original co-sponsor of the legislation, said that “investment advisors play a huge role in the financial lives of millions of Americans, and we should make sure that they’re acting properly. In a time of tight budgets, the Investment Adviser Examination Improvement Act strengthens consumer protection measures in a taxpayer friendly, cost-effective way that requires no appropriated funds.”
See also: State regulators to hike exam fees for Series 63, 65 and 66
Industry trade groups and officials were quick to weigh in with their comments on Waters’ bill.
Ron Rhoades, assistant professor and chairman of the financial planning program at Alfred State College, told AdvisorOne that while Waters’ bill is “welcome news,” and the bill would help “correct” the SEC’s underfunded status ”in a manner that protects individual investors better while not burdening taxpayers,” he maintains that the Financial Industry Regulatory Authority’s efforts to gain oversight over advisors are far from over.
“Despite FINRA’s assertions that it is not pursuing oversight of RIAs in either the House or Senate, [FINRA] continues to spend extraordinary amounts of money each year on lobbying members of Congress,” Rhoades says. “It remains clear that broker-dealer firms are losing market share to RIA firms, and FINRA has budgetary pressures and an uncertain future as a result. I possess no doubt that FINRA will resume its efforts to oversee RIAs at some later time.”
