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December 18, 2014 at 08:00 AM
Securities and Exchange Commission Chairwoman Mary Jo White told lawmakers in a letter on Wednesday that while the agency is considering using third-party audits to boost investment advisor exams, reallocating agency resources from broker-dealer and private fund advisor exams to achieve this goal would “not be advisable.”
Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, and Rep. Scott Garrett, R-N.J., chairman of the committee’s Capital Markets Subcommittee, told White in late November that user-fees collected from advisors to fund their exams was too costly an option and that the agency should “immediately” reallocate resources and also consider third-party audits to increase the number of advisor exams.
But White responded in a Dec. 16 letter to Hensarling that the agency “continues to strive to find ways using existing resources to increase coverage of investment advisors without sacrificing quality or important coverage in other areas,” and that such reallocation efforts have already resulted in more advisor exams.
The number of advisor exams conducted in fiscal year 2014 jumped approximately 20% to 1,164 from 964 in fiscal year 2013, White said, “with staffing levels remaining relatively stable.”
In those two fiscal years, White continued, advisors examined by the agency’s Office of Compliance Inspections and Examinations managed approximately 25% and 30% respectively of the total assets under management by all registered investment advisors.
White noted that the average number of investment advisor exams per examiner in FY2013 was approximately 3.2 and for FY2014 was 3.9, with the typical investment advisor examiner performing an average of six to nine exams per fiscal year in FY2013 and FY2014.
Both Hensarling and Garrett had suggested that White push more broker-dealer exams onto the Financial Industry Regulatory Authority.
