The Securities and Exchange Commission is considering increasing the threshold that determines whether a Registered Investment Advisor is regulated by the SEC or state securities commissions from $25 million in assets under management to $50 million.
That's what Joseph Borg, president of the North American Securities Administrators Association, told attendees at Financial Planning Association's annual meeting in Nashville on October 22. Some SEC officials had even toyed with the idea of transferring regulatory responsibility to the states for RIAs with up to $75 million or $100 million, according to Borg. However, NASAA prefers moving in a slower, more deliberate fashion to see first if the states could handle the increased supervisory responsibility.
Borg also told attendees the majority of the increase in new RIA registrations is coming from money center banks. Other sources have indicated that other key sources of newly registered RIAs include hedge funds and breakaway brokers leaving wirehouses and giving up their licenses. Discovery Database, based in Shrewsbury, N.J., estimates that there are about 29,000 RIA firms; 22,000 of which are "retail oriented"-that is, they are serving individual clients. Of the 22,000, 7,100 are federally registered and 15,000 are state-registered. There are at least 65,000 total employees of RIA firms, according to Discovery.
Participating in a panel with FPA President Dan Moisand, CFP Board Chair-Elect Karen Schaeffer, FPA Director of Government Relations Duane Thompson and Securities Industry Association Counsel Michael Udoff, Borg also voiced an interesting viewpoint about who should be a fiduciary. When a customer tells an advisor everything about his financial life, "at that point you've reached" a fiduciary level, he said.
In addition, Borg also indicated that a sweep of 367 state-level RIAs uncovered more than 2,068 deficiencies, including 44% with inaccurate ADVs and 23% with no contracts or missing contracts.