For several decades, the Securities and Exchange Commission has contended that it does not have sufficient resources to examine and inspect RIAs. Consequently, many have concluded that Finra is the default option for all RIA regulation.

More than a decade ago, the SEC transferred responsibility for regulating small RIAs with less than $25 million under management to state securities regulators. Early next year, it will transfer responsibility for another 4,000 to 5,000 firms with between $25 million and $100 million to the states.

But is the SEC really as overwhelmed as it claims? After advisors with less than $100 million move to state regulation, the SEC's Office of Compliance will have 18 to 20 people for every advisor.

Not all of them are examiners, to be sure. But a big chunk of them are. So how can the SEC claim it only has the resources to inspect RIAs once every 11 years?

If half the people in the department are examiners, that would translate into one examiner for every 40 RIAs. So if the average RIA gets inspected once every ten or 11 years, that would mean the average examiner does four or five inspections a year. At first blush, one would suspect that SEC examiners are spending a lot of time on the golf course working on improving their handicaps.

Obviously the statistics don't tell the entire story. MarketCounsel's Brian Hamburger tells me one-third of the Office of Compliance's staff is devoted to examining and regulating broker-dealers.

That in itself hardly represents an overwhelming vote of confidence on the part of the SEC in Finra, which is supposed to be the primary regulator of broker-dealers. There are more than 10,000 RIAs regulated by the SEC and only about 4,000 broker-dealers overseen by Finra. Given that the SEC is requesting a $1.4 billion budget, roughly the same as Finra's, one has to ask: Why is the SEC buried and why is Finra's trigger finger so itchy to get control of RIA regulation?

After all, one thing that both RIA types and the brokerage community agree on is that Finra hasn't done a particularly good job of regulating the broker-dealer world. The same could be said of the SEC's oversight of the RIA business.

One tale I heard from an RIA several years ago about an SEC examination was particularly revealing. When the examiner discovered that the advisor subscribed to Bob Veres' newsletter, Inside Information, the bureaucrat thought he had just uncovered a big scandal. With all due respect to Bob, that's not the kind of information he writes about.

It is true that the SEC's responsibilities have been expanded to include hedge fund oversight. But more people like Hamburger who understand both agencies far better than I do say that if the SEC allocated its resources effectively, it would be able to examine RIAs a lot more frequently than it does.