Speaking before the Senate Banking Committee in Washington on Tuesday, CFA Director of Investor Protection Barbara Roper said since it's very unlikely that the Securities and Exchange Commission will get additional resources to police the financial advisor industry. As a result, the CFA is now willing to re-consider the creation of a self-regulatory organization, a concept it had long time opposed.

Roper said that if Congress decides instead to use a self-regulatory organization, the CFA would request it be an independent body not associated with broker-dealers. 

"In the past, CFA has categorically opposed delegating investment advisor oversight to an SRO, particularly one dominated by broker-dealer interests and particularly if that SRO were given rule-making authority," Roper said in a transcript of her her testimony. "We continue to believe the user-fee approach outlined in the SEC report offers the best option for funding enhanced inspections in a way that promotes investor protection while minimizing added costs to industry."

"However, having spent the better part of two decades arguing for various approaches to increase SEC resources for investment advisor oversight with nothing to show for our efforts, we have been forced to reassess our opposition to the SRO approach," Roper added "Specifically, we have concluded that a properly structured SRO proposal would be a significant improvement over the status quo. Too often, however, the SRO approach is presented as an easy solution by individuals who have not adequately confronted the many thorny issues it presents."

Roper later told a reporter following her presentation that the Financial Industry Regulatory Authority could play a role in crafting such an independent agency, depending upon what ideas it can bring to the party.

When contacted about Roper's comments, Finra officials said they would support her concept of creating an independent oversight group.

"We have long believed that an SRO approach to assist the SEC with overseeing investment advisors would significantly enhance the protection for those investors who invest with an IA," said Howard Schloss, Finra executive vice president, in a prepared statement.

"And we certainly agree with Ms. Roper that this is a problem that should be resolved sooner rather than later," Schloss added.

The Financial Services Institute praised the CFA for advocating that a Self-Regulatory Organization monitor investment advisors, saying it is critical for the protection of investors.

“I applaud Barbara’s testimony and am pleased that the CFA agrees with us that the best way to protect investors is to ensure advisors have the proper oversight,’’ said FSI president and CEO Dale E. Brown in a prepared statement. “And the most effective way to do so is through an SRO. With a strong SRO in place, all consumers will benefit from the same level of quality and protections, regardless of their financial advisor’s business model."

Lauren Condoluci, director of Ration 360 of the Financial Planning Board Coalition, said the that CFA's frustration with the lack of resources available to the SEC for adviser oversight is understandable.

"The SEC clearly needs to be able to examine advisers more frequently and effectively, but outsourcing oversight responsibility is not the best answer," Condoluci said. "We agree with CFA that funding enhanced inspections at the SEC is still the best option at this point. A radical change to the structure for overseeing advisers -- by creating an expensive new layer of regulation and bureaucracy—is not a sensible way to address the resource issue."

According to Reuters, Tuesday's Senate Banking Committee hearing was ostensibly to assess the SEC's progress in crafting investor protection provisions of the Dodd-Frank oversight law that will be one-year old this month. Part of Dodd-Frank laws requires the SEC to issue a study outlining recommendations for improving investment adviser oversight.