House Bill Would Fund More SEC Exams

The Adviser Examination Act—introduced by Rep. Maxine Waters (D-Calif.), and co-sponsored by House Financial Services Committee Ranking Member Barney Frank (D-Mass.) and Rep. Michael Capuano (D-Mass.)—would authorize the Securities and Exchange Commission (SEC) to collect user fees to increase examinations of registered investment advisers (RIAs).

By comparison, the Investment Adviser Oversight Act of 2012—introduced by Committee Chairman Spencer Bachus (R-Ala.) and Rep. Carolyn McCarthy (D-N.Y.), would authorize one or more SROs. (See “Bipartisan Bill Seeks Expanded Oversight of Advisers.”)         

However, with the financial adviser industry so sharply divided over whether to create a new SRO, or rely on FINRA or the SEC, the Bachus bill has reportedly been shelved.

On the one hand, the Investment Adviser Association and the Financial Planning Coalition (FPC) support the Waters bill. “Creating a new SRO is not the right solution,” FPC said. “The burden of excessive regulation and cost would fall unfairly on small business owners, while many larger firms would be exempt and would go unaffected.”

On the other hand, the Financial Services Institute (FSI) is supporting the Bachus bill. Thus, a consensus is nowhere near at hand. “We’ve said from day one that this was a multi-year process,” said FSI spokesman Chris Paulitz. “What is encouraging with the release of Rep. Waters’ bill, is that now everyone agrees the status quo is not acceptable, and we must increase examination to protect investors.”