House panel approves bills to adjust regulations for small RIAs, protect senior investors

The House Financial Services Committee approved a bill Wednesday that could adjust regulations to better fit small investment advisory firms

The panel also approved a measure that would require the Securities and Exchange Commission to establish an internal task force on protecting senior investors.

Both bills were passed by voice vote and are included in a package of legislation intended to modernize regulation that will head to the House floor.

A bill designed to ease annual audit costs for small broker-dealers that had been on the agenda was withdrawn by its backers Tuesday night so they could try to build more Democratic support. The committee could act on that legislation later in the month.

The House committee approved the Investment Adviser Regulatory Flexibility Improvement Act, which would require the SEC to revise its definition of a “small business” when assessing the impact of its regulations. Under the bill, the SEC must look beyond assets under management and include other factors, such as employment at an advisory firm.

The SEC currently considers an advisory business “small” if it has $25 million in assets under management. But the threshold for SEC registration is $100 million. That means that no SEC-registered adviser is deemed “small” under the existing Regulatory Flexibility Act, which requires agencies to scale regulations to the size of the business being regulated and consider alternatives to reduce regulatory burdens.

A study by the Investment Adviser Association showed that more than 7,000 investment advisory firms employ fewer than 10 nonclerical employees.

“This legislation is one of these bills that’s targeted, it’s reasonable and it can still have a nice impact for real people,” said the bill’s author, Rep. Gwen Moore, D-Wisc. “A lot of these [advisory firms] are eight to 10 people and small businesses. A whole lot of these firms are, in fact, women- and minority-owned businesses.”

The measure was co-sponsored by Rep. Bill Huizenga, R-Mich., and drew praise from Rep. Jeb Hensarling, R-Tex., chairman of the committee.

“This entire package of bills is aimed at small-business capital formation to make sure we are modernizing and rationalizing all of our regulatory infrastructure to ensure that we remain competitive and continue to have a strong economy,” Mr. Hensarling said.

He weighed in from a personal angle on the National Senior Investor Initiative Act, which would require the SEC to set up an interagency task force to focus on challenges facing senior investors.

Mr. Hensarling said the issue hits close to home because he helps his 85-year-old mother manage her nest egg.

“I am appalled by the number of hucksters and scamsters who every day try to separate my mother from the lifetime of savings that my father put together for her,” he said. “It is an area that the SEC should continue to focus on, and with this legislation, I know that they will.”

Earlier this year, Congress approved legislation that encourages financial advisers to report senior exploitation.

Related Topics: Securities and Exchange Commission