Consumer, investment adviser groups push lawmakers to support bill to boost adviser exams

Seven organizations send letter to members of Congress asking for an adviser user fee

Dec 10, 2013 @ 10:54 am

By Mark Schoeff Jr.

Seven interest groups representing investment advisers and consumers are urging lawmakers to sign on to legislation that would charge advisers a user fee to fund more regulatory exams.

In a Dec. 4 letter to each member of Congress, released on Monday, the groups sought to expand support for a measure drafted by Rep. Maxine Waters, D-Calif., which is designed to create a funding stream that would boost the Securities and Exchange Commission's ability to examine registered investment advisers. The SEC examines annually about 10% of the nearly 11,000 advisers that it oversees.

“[A] user fee is the best option to increase investor protection because it is an efficient, economical, and common sense solution to the SEC's chronic problem of insufficient examination resources,” the letter states. “We are deeply concerned that the SEC's current inability to examine investment advisers more frequently increases opportunities for investor fraud and abuse.”

The letter was signed by AARP, the Certified Financial Planner Board of Standards Inc., the Consumer Federation of America, the Financial Planning Association, the Investment Adviser Association, the National Association of Personal Financial Advisors and the North American Securities Administrators Association.

The groups are trying to build momentum for the bill, which has six co-sponsors, following a vote by the SEC Investor Advisory Committee on Nov. 22 that recommended that the commission support the measure.

“We think the time is ripe to get more co-sponsors on that legislation,” said Neil Simon, vice president for government relations at the IAA.

The bill faces an uphill battle in the Republican-controlled House.

It is unlikely to get a hearing in the House Financial Services Committee, where Ms. Waters is the ranking Democrat, or draw much Republican support. Many in the GOP view user fees as taxes.

No similar legislation has been introduced in the Democratic-majority Senate, but Mr. Simon foresees progress.

“We are certainly having conversations on the Senate side, and we hope the recommendation by the SEC Investor Advisory Committee will produce some new activity,” he said.

The SEC advisory panel voted unanimously, with one recusal, to prod the commission to back the bill.

The SEC's lack of financial adviser oversight threatens investors, said Craig Goettsch, a committee member and director of investor education and consumer outreach in the Iowa Insurance Division.

“This is a ticking time bomb if we don't address it,” he said at the Nov. 22 IAC meeting.

Others on the panel were less enthusiastic.

“I do fear that this is going to raise costs to investors,” said Adam Kanzer, managing director and general counsel of Domini Social Investments, who was the member who sat out the vote.

“I don't know that it's going to result in any additional SEC resources. I am skeptical that it's going to make a difference,” said Darcy Bradbury, a panel member, and managing director and director of external affairs at D.E. Shaw & Co.

Ms. Waters reintroduced her bill this year after it died in the previous Congress. Competing legislation that would establish a self-regulatory organization to oversee advisers also failed in last year's Congress and hasn't been re-introduced.

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