SEC Committee Floats User Fees, Third-Party Exams for RIAs

IAC Recommendations

In its recommendation, which IAC approved, the IAC states that the “SEC should request legislation from Congress that would authorize its Division of Examinations to impose ‘user fees’ on SEC-registered investment advisers, the revenue from which could be retained by the SEC to fund and enhance its investment adviser examination program, including more frequent on-site examinations of SEC-registered advisers.”

In March, the IAC states, it explored other potential approaches to enhancing oversight of SEC-registered advisors, such as:

• Reallocating more oversight responsibilities to state regulators;
• Creating a self-regulatory organization to examine RIAs;
• Giving FINRA authority to examine firms that are dually registered as broker-dealers and RIAs; and
• Permitting third-party examinations of RIAs.

Peirce asked the committee to address a series of questions in their consideration of both potential solutions.

“How would the user fees be set, and what role would Congress play in setting it?” Peirce asked. “Untethering this piece of the SEC’s budget from direct congressional appropriation could undermine the SEC’s accountability to Congress.”

Further, Peirce asked, “given the battering the industry is taking courtesy of an unprecedented wave of costly regulations, would the imposition of a user fee or the forced hiring of third-party examiners serve as that one last straw on the back of small advisers?”