(Dow Jones) A group of state regulators say they're up to the task of policing smaller investment advisors. They just may be short on some details.

Correspondence between U.S. Rep. Carolyn McCarthy (D., N.Y.) and Denise Voigt Crawford, president of the North American Securities Administrators Association, or NASAA, an organization of state regulators, shows that state regulators, who want authority to examine advisors managing assets between $25 million and $100 million, lack certain key specifics about their ability to accomplish that task.

That's troubling, given that states could assume responsibility for about 4,000 additional advisers if federal legislation becomes law, according to NASAA's estimates.

Landmark reform bills in both the U.S. House and Senate would allow state securities regulators to examine those advisors, which are now subject to Securities and Exchange Commission oversight. States are better equipped to monitor smaller advisors since they operate mainly on local turf, says NASAA. The SEC, which oversees about 11,000 registered investment advisors, lacks resources to examine smaller advisors, Crawford told reporters on Tuesday.

But some states may not have those resources, either.

McCarthy, a member of the House Financial Services Committee, wrote to Crawford on January 10 asking about the ability of state regulators to examine investment advisors. Some of the six questions conveyed a concern about fragile state budgets, according to copies of the correspondence reviewed by Dow Jones Newswires.

"With the current strain on many state budgets, how do your members anticipate funding the increased workload?" wrote McCarthy.

"Not every state will experience a material increase in their workload," replied Crawford in a letter on March 19. Very few firms will be added to the rosters of some states, but others "will experience more significant adjustments," she wrote.

Many state securities divisions are self-funded through licensing and registration fees they collect from the securities industry and don't rely on state revenue for support, wrote Crawford, who is also Texas Securities Commissioner. She cited a cooperative agreement among state regulators to assist one another in certain investigations.

At least 21 states could be able to examine advisors at least every five years without adding additional examiners, she contended. Her letter, however, didn't include specifics about those states or how many of the remaining 29 would address their added responsibilities.

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