House GOP tells SEC to improve adviser oversight
House Republicans who oversee the SEC told the agency to do a better job of regulating investment advisers — and to do it without a significant budget increase.
House Republicans who oversee the Securities and Exchange Commission told the agency on Friday to do a better job of regulating investment advisers — and to carry out the task without a significant budget increase.
The House Financial Services Committee approved on a party-line vote and sent to the House Budget Committee Friday a budget-estimate report that said the SEC does not need the 15% funding increase it is requesting from Congress for fiscal 2016.
The SEC has said a priority for additional funding would be to hire more investment-adviser examiners. But the document approved by the House committee said the SEC has already bolstered its examination staff without improving adviser regulation.
“The SEC has added a number of new [Office of Compliance Inspections and Examinations] examiners in recent years,” the document states. “However, these examiners are more focused on private fund adviser examinations rather than examinations of advisers that serve retail investors.”
For several years, the SEC has been seeking significant budget increases in order to increase the number of adviser examinations. The agency says it has the resources to examine annually about 10% of the approximately 11,500 registered investment advisers.
The House committee, which has a Republican majority, criticized the SEC for the regulatory gap.
“The SEC has not put forth a viable plan to increase the number of advisers subject to examinations, which might include the use of third-party examinations or the reallocation of existing resources,” the document said.
In a statement before the SEC Investor Advisory Committee on Thursday, SEC Chairwoman Mary Jo White said the agency has used its $150 million budget boost for fiscal 2015 to strengthen adviser oversight.
“While significantly more is needed, one positive note is that we will be able to use funds we were appropriated for 2015 to hire some additional examiners, which will help increase our exam coverage of investment advisers,” Ms. White said. “Our 2016 budget request also prioritizes this area and more is needed.”
Rep. Maxine Waters, D-Calif., ranking member of the House Financial Services Committee, offered an amendment to the panel’s budget-estimate document that would have given the SEC its entire $1.7 billion budget request, up from its current $1.5 billion. The amendment was defeated on a party-line vote.
In the previous Congress, Ms. Waters introduce a bill that would have allowed the SEC to charge user fees to advisers to fund an increase in examinations.
The legislation garnered one Republican co-sponsor but never received a hearing. An aide to Ms. Waters said she intends to re-introduce the bill.
In a letter last year to Ms. White, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Rep. Scott Garrett, R-N.J., chairman of the capital market subcommittee, said they oppose the user-fee idea. They urged Ms. White to re-allocate existing SEC resources to boost adviser exams.
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