The House Financial Services Committee today unanimously approved a measure that would move oversight of investment advisory firms with less than $100 million in assets to state securities regulators.
Currently, advisory firms with less than $25 million are regulated by the states, while advisers with more assets are regulated by the Securities and Exchange Commission.
Committee chairman Barney Frank, D-Mass., offered the measure as an amendment to the proposed Investor Protection Act of 2009, which would raise standards for all financial advisers who provide personalized advice on securities to fiduciary standards. The amendment was approved on a voice vote with little debate.
Rep. Paul Kanjorski, D-Pa., chairman of the Capital Markets Subcommittee, had earlier said that an agreement had been reached to raise the threshold to $150 million in assets under management.
State securities regulators applauded the move.
"States have both the will and the ability to regulate," Texas Securities Commissioner Denise Crawford said in a statement. Ms. Crawford is president of the North American Securities Administrators Association Inc.
"Increasing the threshold to $100 million would reduce the SEC’s examination burden and allow the agency to focus on larger firms and other market issues," she said. "It’s clear that states have done a much better job at deploying their limited resources. States are ready to accept this increased responsibility.”
The committee also approved an amendment offered by Rep. Carolyn McCarthy, D-N.Y., which would authorize a study of whether investment advisers should be regulated under a self-regulatory organization.
Advisory groups have opposed coming under an SRO. They fear that the
Financial Industry Regulatory Authority Inc. would be put in charge of the advisory industry.
Ms. McCarthy's amendment would require the SEC to report back to Congress in six months on whether an SRO is needed, taking into account the frequency of exams of advisory firms over the past five years. In fiscal 2009, the SEC has said it will examine about 9% of advisory firms, while Finra examines about 55% of the broker-dealer firms it regulates.
"Investment adviser firms are woefully under-examined," Ms. McCarthy said. “The study will bring insights on changes needed to protect investors," she said.
