Time runs out on bills to ease small broker audits, highlight regulatory impact on small advisers

Advocates for the measures vow to fight again next year, tout bipartisan support in Congress

Dec 20, 2018 @ 2:06 pm

By Mark Schoeff Jr.

As the clock ticks down on the lame-duck session of Congress, time has run out for legislation that would affect investment small brokers and investment advisers.

Although a bill to prevent a partial shutdown of the federal government on Friday has not yet been approved, the measure is unlikely to have any provisions attached to it. That's the death knell for two bills being pushed by financial adviser advocates.

The Small Business Audit Correction Act would ease audit requirements for small broker-dealers that don't custody funds, giving them what backers of the bill call a less costly alternative.

The Investment Adviser Regulatory Flexibility Improvement Act, which was part of the 32-bill package known as the Jobs Act 3.0, would require the Securities and Exchange Commission to change the way it defines a "small business," resulting in the agency including more small advisory firms in the category as it assesses the impact of its regulations.

The audit bill gained the approval of the House Financial Services Committee in September, but it failed to get a vote on the House floor or consideration by the Senate Banking Committee.

Nonetheless, its chief proponent was working as late as Wednesday to try to get the bill fast-tracked in both chambers and approved before the end of the year.

"We were so close," said Paige Pierce, senior vice president of Larimer Capital Corp. "We just ran out of runway."

The Jobs 3.0 Act gained House approval but was not acted on by the Senate and failed to gain traction during the lame-duck session. Retirement-savings legislation met a similar demise.

All bills that died in the congressional session drawing to a close this month will have to start from scratch in the new Congress, which begins Jan. 3.

Proponents say they will try again because their measures garnered bipartisan support.

"From the get-go, it had very strong backing from both sides of the aisle," Neil Simon, vice president for government relations at the the Investment Adviser Association, said of the bill to change the definition of a small business in SEC rulemaking. "We are hopeful it will be reintroduced and are preparing to advocate for its passage in the [next] Congress."

Ms. Pierce is optimistic about the prospects for the small-broker audit bill based on conversations she had this week with House Democratic offices. Democrats will be in the House majority next year.

"They believe all the work we did this year positions us well for the next Congress," she said. "That makes me feel good."

She said more than 1,500 small brokerages were involved in lobbying for the bill and want to finish the job.

"We will get this across the line if it kills me," Ms. Pierce said.

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