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January 14, 2014 at 08:13 AM
The just-released 2014 Omnibus Appropriations bill from the House Appropriations Committee fails to give the Securities and Exchange Commission the additional resources it needs to perform “critically important” investor protection functions, namely boosting the number of advisor exams, advocates say.
The 1,582-page proposal, which was released late Monday and is expected to come up for a vote Wednesday, includes $1.35 billion for the SEC, which is $29 million more than the agency’s fiscal year 2013 budget but $324 million below the Obama administration’s budget request. That request included funding that would have allowed the SEC’s Office of Compliance Inspections and Examinations to hire 250 additional advisor examiners.
Neil Simon, vice president for government relations at the Investment Adviser Association in Washington, says that IAA is “disappointed” that the budget allotted to the SEC falls short in providing the agency with the additional resources to add staff “so that it can increase its oversight of investment advisory firms.”
SEC spokesman John Nester told ThinkAdvisor that the proposed funding level “falls short of what we need to fulfill our responsibilities to investors and our markets. It will limit our ability to bolster our enforcement and examinations programs, implement our new duties regarding derivatives, private fund advisors and municipal advisors, and invest in critical technology for market oversight and law enforcement.”
IAA’s Simon said the shortfall in funding “makes it all the more important that Congress allow the SEC to supplement its resources through user fees, as provided by the Investment Adviser Examination Improvement Act,” H.R. 1627, which is sponsored by Reps. Maxine Waters, D-Calif and John Delaney, D-Md.
IAA along with AARP, the Consumer Federation of America, the Certified Financial Planner Board of Standards, the Financial Planning Association, the National Association of Personal Financial Advisors and the North American Securities Administrators Association released a joint statement after the appropriations bill was released encouraging Congress to take up H.R. 1627 ”to ensure effective oversight of the investment advisory profession by the SEC.”
Waters said in a statement that the bill ”fails” to give Wall Street cops like the SEC adequate funding “to ensure that the financial services industry adheres to the rules of the road.” The bill, she said, ”provides the already underfunded SEC with level funding, but attaches onerous strings to those resources.”
Indeed, Duane Thompson, senior policy analyst at fi360, agrees that the SEC’s budget under the appropriations bill “will mean very few new hires for the agency’s examination program of investment advisors.” In particular, Thompson notes, “the House bill would strip $44 million of the new budget from other operation areas to increase resources for economic analysis of future SEC rulemakings.” While “that doesn’t mean the SEC will not try and leverage its resources to ramp up the inspection cycle of SEC-registered advisors … at the end of the day the SEC will need more boots on the ground to increase its inspection cycle.”
