By Sarah N. Lynch
WASHINGTON, April 19 The top Democrat on the
U.S. House Financial Services Committee has introduced a bill
that would give federal securities regulators the power to
impose fees on investment advisers to help the agency expand and
improve its examinations.
The bill from Financial Services Ranking Member Maxine
Waters and Maryland Democratic Congressman John Delaney aims to
help the Securities and Exchange Commission afford to hire more
examiners to conduct inspections of advisory firms.
"This legislation 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," Waters said in a statement.
The SEC has long complained it does not have the resources
to properly examine the investment advisory industry. Currently
it is only able to conduct exams of about 8 percent of its
11,000 registered advisers.
The bill is similar to legislation Waters introduced last
year. But whether it can get any traction in the
Republican-controlled House remains to be seen.
There has long been controversy and disagreement over how to
improve the frequency and quality of adviser exams.
Some lawmakers and the brokerage industry have called for
the creation of a self-regulatory organization, or SRO, such as
the brokerage industry-funded Financial Industry Regulatory
Authority, to take on the task.
FINRA has lobbied for the job. Last year, it won the backing
of former House Financial Services Chairman Spencer Bachus, who
introduced dueling legislation with Waters' bill to create an
But the advisory industry and state regulators are staunchly
opposed to having an SRO, particularly if it is FINRA.
They say FINRA, which self-polices brokerages, would not be
a good fit for the advisory business and they prefer to have the
SEC do the exams.
The head of FINRA told Reuters in February that his group
was backing off its SRO lobbying campaign until, at least, such
a measure had broader support from lawmakers and the
SEC itself. But FINRA released a statement on
Friday saying current levels of investment adviser oversight and
examinations are "unacceptable and a risk to investors." The
"significant gap" in investor protection needs to be addressed,
The SEC, in the meantime, continues to lacks the funding to
comprehensively expand its examination program. It wants U.S.
lawmakers to boost its funding, in part, so that it could add
250 more examiners. President Barack Obama's proposed $3.77
trillion budget for fiscal 2014 would increase the SEC budget by
27 percent to $1.67 billion.
Both the industry and state regulators praised the
Waters-Delaney bill on Friday.
"This legislation represents the smartest, fastest, and most
cost-effective solution to ensure greater frequency of
investment adviser examinations," said Investment Adviser
Association Executive Director David Tittsworth.
Heath Abshure, president of the North American Securities
Administrators Association, which represents state regulators,
added in a separate statement that the bill would enhance
oversight of advisers while avoiding "doing so at taxpayers'