Washington INsider

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Mark Schoeff Jr. looks at what's really happening on Capitol Hill - and the upshot for advisers.

SRO opponent declares victory for this year

Congress adjourned last week without a vote on the controversial Bachus bill

Sep 25, 2012 @ 3:12 pm

By Mark Schoeff Jr.

investment advisers from the Securities and Exchange Commission to an industry group is declaring victory — for this year.

Congress adjourned last week until after the election without the House Financial Services Committee voting on a bill written by Chairman Spencer Bachus, R-Ala., that would authorize one or more self-regulatory organizations.

"It is probable that H.R. 4624 — the Spencer Bachus SRO bill — is dead," David Tittsworth, executive director of the Investment Adviser Association, said at a forum at the Cato Institute in Washington.

The bill is not likely to come up in the lame-duck congressional session after the election.

"It does appear we've dodged that bullet for now," Mr. Tittsworth said at the event, which was co-sponsored by the Institute for the Fiduciary Standard.

The SRO bill was the subject of a hearing in early June. Since then, Mr. Bachus has not been able to generate enough support for the legislation to move it out of the committee.

In August, he said that the bill is on hold until he can develop consensus on the topic among his congressional colleagues.

"The Bachus bill is dead for this year," said Mark Calabria, director of financial services regulation at Cato.

The measure is a priority for the Financial Industry Regulatory Authority Inc., the SRO for the brokerage industry that covets the same role in the advisory sector.

Finra and other SRO proponents likely will revive the bill in 2013, when the new Congress convenes.

Mr. Calabria, however, asserts that it will be a difficult battle for them.

"Two years from now, we're going to be at the same status quo," Mr. Calabria said. "I can see this issue dying."

A spokesman for Mr. Bachus did not immediately respond to a request for comment.

The Securities Industry and Financial Markets Association intends to continue the fight for an SRO bill.

“We'll support it in the next Congress,” said Kevin Carroll, SIFMA managing director and associate general counsel. “The debate will continue.”

Even though an SRO bill failed to advance this year, SIFMA maintains that the issue of adviser oversight has been elevated. Lawmakers and groups that are supporting an alternative to Mr. Bachus' bill – legislation that would increase SEC funding for adviser examinations – agree that the current cycle of once every 11 years is too lax.

“That is a huge investor protection risk,” Mr. Carroll said. “There is a grave need for increased oversight of advisers.”

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