A bill aimed at cutting paperwork costs and easing advertising restrictions for SEC-registered investment advisors is expected to be approved by the House of Representatives.
The approval is expected this week or next, but opposition by two key Democrats could kill the bill’s chances by signaling an Obama veto (if it passes the Senate) and a lack of Senate votes for a veto override.
Rep. Maxine Waters, the ranking Democrat on the House Financial Services Committee, called the bill part of a Republican effort to gut Wall Street regulations.
Joining Waters in opposition is Rep. Carolyn Maloney, the senior Democrat on the Financial Services subcommittee that oversees the SEC.
Investment Adviser Association President and CEO Karen Barr and other industry proponents of the legislation, called the Investment Advisers Modernization Act, have argued the law is needed to update regulations to take into account the considerable changes in the industry since the original Advisers Act became law over 75 years ago.
However, the Consumer Federation of America and Americans for Financial Reform have charged the legislation would undermine protections for retirement savers by lifting important disclosures for private fund advisors.
While former SEC Republican Commissioner Daniel Gallagher said the bill would remove private fund restrictions on advertising only to sophisticated investors, CFA and AFR noted that as of three years ago, 35 percent of the capital in private funds comes from retirement funds, mostly public pension systems.
“[The bill] would act to return private funds to the shadows of the financial system, and dramatically restrict the SEC’s capacity to effectively protect investors from possible
exploitation by fund advisors,” Barbara Roper, CFA’s director of Investor Protection, and AFR Executive Director Lisa Donner wrote in a joint letter.