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Financial Planning Coalition Supports Introduction of Legislation to Increase Investment Adviser Oversight

Jul 25, 2012

New Legislation from Rep. Maxine Waters Would Enhance Oversight and Increase Consumer Protections without Burdening Small Businesses with Costly New Regulations

The Financial Planning Coalition today welcomed the introduction of the Investment Adviser Examination and Improvement Act of 2012 introduced by Representative Maxine Waters (D-CA) and co-sponsored by House Financial Services Committee Ranking Member Representative Barney Frank (D-MA) and Representative Michael Capuano (D-MA), which authorizes the Securities and Exchange Commission (SEC) to collect user fees to fund increased examinations of registered investment advisers.

The bill is a credible alternative to the Investment Adviser Oversight Act of 2012 (H.R. 4624), introduced in April, which would impose higher costs and a redundant regulatory burden on small advisory firms by mandating that they join a self-regulatory organization (SRO), in addition to current SEC and state regulatory oversight.

“The status quo is not acceptable—we need to dramatically increase the frequency of investment adviser examinations,” said the Coalition. “But creating a new SRO is not the right solution. The burden of excessive regulation and cost would fall unfairly on small business owners while many larger firms would be exempt and would go unaffected.”

Representative Waters, in remarks introducing the legislation, stated that her bill is “the simplest, most efficient solution to the problem of inadequate adviser oversight.” She also cited a Coalition-sponsored study by The Boston Consulting Group, noting that it showed “establishing a self-regulatory organization … would likely cost twice as much as funding an enhanced SEC examination program.” The Coalition also pointed out that this alternative approach comes at no cost to the taxpayers nor would it impact the federal budget. In addition, it would not require establishing a new regulatory bureaucracy and ensures Congress retains direct oversight and accountability over the SEC.

“Between Representative Waters’ legislation and the recent Senate budget providing increased resources for investment adviser oversight, it is clear that an SRO is not the only option for increasing the frequency of examinations,” said the Coalition. “We look forward to working with the Financial Services Committee on a solution that will enhance consumer protection by increasing oversight of all investment advisers.”

The new legislation comes as surveys show that investment advisers are willing to pay user fees to increase examinations. A statistically significant survey of investment advisers conducted by The Boston Consulting Group showed that 81 percent of investment advisers would prefer to pay user fees to the SEC than to pay membership fees to a FINRA investment adviser SRO.


About the Financial Planning Coalition
The Financial Planning Coalition, a group representing nearly 75,000 financial planners, is a collaboration of Certified Financial Planner Board of Standards, Inc. (CFP Board), the Financial Planning Association® (FPA®), and the National Association of Personal Financial Advisors (NAPFA) formed to advise legislators and regulators on how to best protect consumers by ensuring financial planning services are delivered with fiduciary accountability and transparency. To learn more, please visit www.FinancialPlanningCoalition.com.

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