Public Policy

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Investment Adviser Oversight

Issue

In Section 914 of the Dodd-Frank Act, Congress directed the Securities Exchange Commission (SEC) to analyze the need for enhanced examination and enforcement resources for investment advisers and to make recommendations to Congress.  In its report, the SEC staff recognized that it lacked sufficient resources to examine investment advisers with sufficient frequency (the average investment adviser is examined less than once every 11 years), and recommended options to Congress to address the need for scalable resources to increase examinations of advisers.  The two options that have been under consideration by Congress are:

  1. Authorize the SEC to collect user fees from registered advisers to increase adviser examinations; and
  2. Authorize the SEC to recognize one or more self regulatory organizations (SROs) to oversee registered investment advisers.

Position

The current rate of examinations of investment advisers by the SEC is inadequate and must be addressed.  The Financial Planning Coalition supports authorizing the SEC to collect user fees from registered investment advisers to increase investment adviser examinations.

Rationale


Authorizing the SEC to collect reasonable user fees is a direct and effective solution to increase adviser examinations and protect investors

  • It would increase examinations for all investment advisers to an acceptable level to protect investors.
  • It would address the SEC’s lack of resources with no impact on taxpayers or the federal deficit.
  • It would be the most cost-effective and efficient solution.
  • It would not require establishing a whole new regulatory bureaucracy.
  • It would allow Congress to retain direct oversight and accountability over the SEC.
  • It would be supported by investment advisers.  A Boston Consulting Group survey that found that 81 percent of investment advisers would prefer to pay user fees to the SEC than a membership fee to a FINRA SRO.

Creation of an SRO for investment advisers is unnecessary, costly and would create new problems

  • It would establish a new bureaucracy where one already exists.
  • It would cost over five times as much the cost of enhancing the existing SEC examination program.
  • It raises significant investor protection issues, including conflict of interest concerns should FINRA, the current SRO for broker-dealers, be authorized as the SRO for investment advisers.

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Financial Planning Coalition

CFP Board, the Financial Planning Association®, and the National Association of Personal Financial Advisors are working together as the Financial Planning Coalition to pursue consumer protection and industry reform.

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