Press Releases

Waters’ Legislation Would Bolster Investment Adviser Examinations

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Washington, DC, April 19, 2013 | comments

Congresswoman Maxine Waters, Ranking Member of the House Financial Services Committee, has introduced legislation to provide the U.S. Securities and Exchange Commission (SEC) with the authority to impose and collect user fees on investment advisors. The Investment Adviser Examination Improvement Act of 2013 (H.R. 1627) would provide the SEC with a dedicated funding source in order to make possible a more robust investment adviser oversight program.

Since the financial crisis five years ago, public confidence in our financial markets has deteriorated. Moreover, due to largely inadequate levels of funding over the last decade, the SEC is currently able to conduct annual examinations of only approximately 8% of the almost 11,000 SEC-registered investment advisers nationwide. While the vast majority of investment advisers operate with integrity in helping their clients to meet financial goals, it is clear that the SEC’s current examination levels need to be augmented in order to restore public trust in the financial marketplace.

In introducing the bill, Ranking Member Waters said “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 and another step towards restoration of public confidence in our markets.”

Representative John K. Delaney, a member of the House Financial Services Committee and an original cosponsor of the legislation, said “Investment advisers play a huge role in the financial lives of millions of Americans and we should make sure that they’re acting properly. In a time of tight budgets, the Investment Adviser Examination Improvement Act strengthens consumer protection measures in a taxpayer friendly, cost-effective way that requires no appropriated funds. This legislation would allow the SEC to improve oversight and help protect investors.”

Congress recognized the problem of inadequate investor adviser oversight when it enacted the Wall Street Reform and Consumer Protection Act of 2010, which tasked the SEC with studying the best approaches for improving the investment adviser examination system.  The user-fee legislation introduced today by Ranking Member Waters and Representative Delaney is consistent with the first option recommended by the SEC in its report to Congress on this issue.

Heath Abshure, president of the North American Securities Administrators Association (NASAA) and Arkansas Securities Commissioner, offered support for the legislation stating, “State securities regulators strongly support Congressional efforts to improve the oversight of federally registered investment advisers by acting on a recommendation of the Dodd-Frank Act and establishing a dedicated funding mechanism to ensure that the SEC Office of Compliance, Inspections, and Examination’s resources are aligned  with its examination responsibilities.”

The Investment Advisor Association (IAA), the nation’s leading trade association for investment advisers, welcomed the legislation stating that it will “provide a stable source of funding to SEC to be used for the sole purpose of enhancing investment adviser examinations and will do so without the expenditure of any additional taxpayer dollars.”

The Financial Planning Coalition comprised of the Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA) has noted that “increasing adviser examinations is good for both consumers and advisers.” 

H.R. 1627 would also preserve the expanded role of state securities regulators provided under the Dodd-Frank Act, which directs the SEC to focus on large advisers – those with more than $100 million in assets under management.

 

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