Financial Services Committee Chairman Spencer Bachus and Rep. Carolyn McCarthy, a member of the Committee, introduced bipartisan legislation calling for a self-regulatory organization to fill gaps in Securities and Exchange Commission (SEC) oversight of investment advisers.
The SEC examines nine percent of investment advisers each year. In comparison, the Financial Industry Regulatory Authority (FINRA) examines 55 percent of broker-dealers every year, and all registered representatives are subject to annual compliance reviews by their broker-dealers.
Approximately 33 percent of investment advisers have never undergone SEC examinations.
“The Bachus-McCarthy legislation would provide an important consumer protection,” said NAIFA President Robert Miller. “Public faith in all financial professionals depends on intelligent regulation that provides appropriate oversight without creating overwhelming compliance burdens. When the SEC has never taken even a cursory look at a third of investment advisers, that creates a trust gap with consumers.”
NAIFA has advocated that Congress authorize FINRA to become the self-regulatory organization, subject to appropriate SEC supervision, of all SEC-registered investment advisers.
“Just over 25 percent of NAIFA members are investment advisers, and 99 percent of these are also registered reps subject to FINRA oversight,” said Mr. Miller. “Having FINRA serve as the SRO for investment advisers would be the least disruptive and most cost-efficient option for these dual-registered NAIFA members.”
While the current bill does not name FINRA, it would lay the groundwork for FINRA to apply to become an SRO for investment advisers.
See NAIFA Issue Brief on SRO for Investment Advisers.