You have to hand it to House Financial Services Committee Chairman Spencer Bachus. He knows the power of a head fake.
How else to explain Mr. Bachus' flip-flop over whether to continue touting his bill calling for the creation of one or more self-regulatory organizations to oversee investment advisers?
First, he pushed hard. Then, when the opposition pushed back even harder, Mr. Bachus raised the white flag and lulled everyone into thinking that he had realized the error of his ways.
Then — kapow! — out of nowhere, he delivers another punch.
Only this time, the Alabama Republican is taking his case for additional oversight to a more sympathetic audience: individual investors, the vast majority of whom have every reason to be suspicious of the financial services industry.
Depending on your point of view, Mr. Bachus is either mad or a genius. One thing is for sure, though: He is keeping everyone on their toes.
Last week, he had many in the advice community scratching their heads over an Op-Ed he wrote for The Wall Street Journal in which he urged investors to get behind him on the Investment Adviser Oversight Act.
The bill, which Mr. Bachus and Rep. Carolyn McCarthy, D-N.Y., introduced in April, calls for the creation of one or more SROs to oversee advisers. The general consensus in Washington — and the part of the proposed legislation that is ruffling so many feathers in the adviser community — is that one of those SROs would likely be the Financial Industry Regulatory Authority Inc.
“I see no way to deter bad actors and to protect American investors without increased oversight,” Mr. Bachus wrote. “The risk of another Madoff scandal ought to be a sobering thought — not only for Congress and the investing public but for the investment adviser industry as well.”
The fact that Mr. Bachus is in favor of an SRO isn't surprising. What is surprising is that his opinion piece last Monday represented a reversal of course from where he stood less than two weeks earlier.
On July 25, following the introduction of a measure by Rep. Maxine Waters, D-Calif., a member of his committee, that would allow the SEC to charge advisers user fees to fund examinations, he said that he was suspending his proposal indefinitely.
In his Op-Ed, however, Mr. Bachus made it clear that his proposal shouldn't be left for dead.
“The investing public deserves better oversight of these professionals to whom they have entrusted their money and, in many cases, their retirement future,” he wrote.
Mr. Bachus is unlikely to find any argument there.
Even those opposed to his bill generally agree that the Securities and Exchange Commission is doing a miserable job of regulating advisers.
But let's be fair.
What Mr. Bachus can't — or won't — admit is that Ms. Waters' legislation is infinitely better than his. Rather than add another level of regulation and compliance, as his bill would do, her proposal would empower the SEC to step up its game.
Mr. Bachus also seems oblivious to the fact that many, if not most, advisers prefer user fees to being overseen by an SRO, especially Finra. In an InvestmentNews survey last month, 58.7% of 293 registered investment advisers said that they favored allowing the SEC to charge advisers a user fee for examinations.
As a watchdog for individual investors, the SEC is far from perfect.
That said, it is infinitely more transparent and less conflicted than Finra. What Finra has in resources and experience, it lacks in philosophical bearings.
For that reason — and that reason alone — the SEC should oversee investment adviser regulation.
Frederick P. Gabriel Jr. is the editor of InvestmentNews. Twitter: @fredpgabriel