The Financial Planning Coalition today threw its support behind the Investment Advisor Examination and Improvement Act of 2012, which would authorize the Securities and Exchange Commission to collect user fees to fund increased examinations of registered investment advisors.
The act was introduced by Rep. Maxine Waters (D-Calif.) today and co-sponsored by House Financial Services Committee Ranking Member Rep. Barney Frank (D-Mass.) and Rep. Michael Capuano (D-Mass.).
FPC officials in a prepared statement called Waters' bill a credible alternative to the Investment Advisor Oversight Act of 2012 (H.R. 4624) introduced in April. The FPC is a collaboration of that Certified Financial Planner Board of Standards Inc., the Financial Planning Association and the National Association of Personal Financial Advisors, which in total represent nearly 75,000 financial planners.
In introducing the legislation, Waters called her bill is "the simplest, most efficient solution to the problem of inadequate advisor oversight."
Waters also cited a coalition-sponsored study by The Boston Consulting Group that concluded creating a self-regulatory organization (SRO) would likely cost twice as much as funding an enhanced SEC examination program.
The FPC claims that the original Investment Advisor Oversight Act, if passed, would impose higher costs and a redundant regulatory burden on small advisory firms by mandating that they join an SRO, in addition to current SEC and state regulatory oversight.
In contrast, the FPC claims that the alternative bill 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.
"The status quo is not acceptable -- we need to dramatically increase the frequency of investment advisor examinations," said the FPC in a statement. "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."
"Increasing the SEC's budget to a level that would significantly increase consumer protection just isn't political reality," according to a statement by the Financial Services Institute (FSI). "Even Commissioner Walter said a fully funded SEC wouldn't be able to significantly increase RIA examinations."
The FPC cited another BCG survey, also sponsored by the coalition, that indicated that 81% of investment advisors would prefer to pay user fees to the SEC than to pay membership fees to a Finra investment advisor SRO.