Backers of bill to ease small-firm regulatory burden seek Senate gains after House win

Backers of bill to ease small-firm regulatory burden seek Senate gains after House win
The legislation would force the SEC to calibrate compliance costs for small and growing businesses, including advisory firms.
JUN 01, 2023

Advocates for legislation that would ease the regulatory burden on small investment advisory firms hope the measure's overwhelming House approval this week will give it a boost in the Senate.

The House passed the bill — Small Entity Update Act — Tuesday, 367-8, under special floor procedures that fast-track bills that will gain a two-thirds majority.

The measure would require the Securities and Exchange Commission to conduct a study followed by a rulemaking that would update its definition of a “small entity” under the Regulatory Flexibility Act. The goal is to force the SEC to calibrate compliance costs for small and growing businesses, including advisory firms. The Investment Adviser Association is one of its strongest backers.

“We’re absolutely delighted this bill was passed by the House with such strong bipartisan support,” said Neil Simon, IAA vice president for government relations. “That support increases the likelihood this piece of legislation will be taken up in the Senate.”

The IAA asserts that the SEC needs to reassess how its rules affect small advisors because the agency currently considers small advisors to be those with $25 million or less in assets under management, despite the SEC registration threshold of $100 million in AUM.

That means a rule could be implemented in the same way for an advisor with $300 million in AUM as it is for one with AUM many multiples higher. The IAA would like to see a definition of small advisor that’s based on number of employees or some other metric.

The IAA has put the bill at the top of its agenda for its Advocacy Day in early June, when the organization's members will go to Capitol Hill to meet with lawmakers and staff.

“This is something we’re going to be working on in the days and weeks ahead,” Simon said.

During the House debate, the bill’s author, Rep. Ann Wagner, R-Mo., said government should account for the compliance challenges small firms face.

“In order for our economy to thrive, Congress and regulators must ensure that any policies enacted keep in mind any impacts [they] would have on our millions of small businesses,” said Wagner, chair of the House Financial Services Subcommittee on Capital Markets.

The ranking member of the full House Financial Services Committee, Rep. Maxine Waters, D-Calif., said the bill would empower small SEC registrants.

“Small entities under the SEC’s jurisdiction … would gain a louder voice when it comes to the development of SEC regulations that directly apply to them,” Waters said on the House floor.

Bet big on bond ETFs, buy quality stocks and gold, says iShares strategist

Latest News

Are you developing resilient clients?
Are you developing resilient clients?

Preparing your clients to withstand the ups and downs of change – both external and internal – could be the key to unlocking their loyalty, trust, and confidence.

Greg Cornick, former number two at Osaic, slides down the management pole
Greg Cornick, former number two at Osaic, slides down the management pole

After leaving LPL in 2020, it hasn’t gone Cornick’s way at Osaic.

MIT’s Andrew Lo sees AI ready to run your money in five years
MIT’s Andrew Lo sees AI ready to run your money in five years

The finance professor and quant investing veteran believes with the right guardrails, artificial intelligence could be trusted to meet the high bar of fiduciary advice.

Advisor moves: UBS advisors defect to Ameriprise, Merrill Lynch
Advisor moves: UBS advisors defect to Ameriprise, Merrill Lynch

UBS has also regained some ground as it recruited an experienced Merrill advisor in New York.

Former California advisor indicted for alleged $9.5M Ponzi scheme
Former California advisor indicted for alleged $9.5M Ponzi scheme

The ex-Bay Area broker reportedly continued to peddle fake bond investments, promising rates of returns exceeding 20%, even after FINRA suspended his license in 2014.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.