SEC's White calls third-party adviser exam idea 'creative'

Chairman says agency has the authority to implement such a rule

May 22, 2014 @ 12:01 pm

By Mark Schoeff Jr.

SEC, advisers, adviser examination, Mary Jo White
+ Zoom
(Bloomberg News)

Securities and Exchange Commission Chairman Mary Jo White on Thursday indicated she was open to the idea of outsourcing examinations of investment advisers, calling it “creative.”

Earlier in the week, SEC Commissioner Daniel Gallagher said that the agency should propose a rule that would require advisers to hire third-party contractors to review their operations.

The move would help strengthen adviser regulation, according to Mr. Gallagher. The agency currently examines only about 9% of the roughly 11,000 registered investment advisers each year.

“His suggestion is a creative one,” Ms. White told reporters at the Investment Company Institute general membership meeting in Washington. “There are a number of issues that have to be carefully looked at, including authority issues.”

The SEC does have the ability to implement a rule establishing third-party examinations, Ms. White said. Investment advisers have expressed concerns about potential costs. Three of the five SEC commissioners have to agree to propose a new regulation.

As she has done in many of her public appearances, Ms. White emphasized that the agency has to do a better job of overseeing advisers.

“The priority for us is to increase that coverage so that we're carrying out our investor protection function, as we're assigned to do,” Ms. White said.

It's unlikely the SEC will receive its full budget request from Congress — $1.7 billion for fiscal 2014, up from its current $1.3 billion budget. Ms. White has said that a priority for the extra dollars would be to hire more investment adviser examiners.

During a Q&A session with ICI president and chief executive Paul Schott Stevens, Ms. White said that the SEC is improving its use of technology to focus its examinations on “areas of highest potential risk.”

“We're much smarter about the resources we're spending,” Ms. White said.

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