Brokerage exec pushes to get audit bill approved before Congress adjourns

Many trade associations representing financial advisers have put a major emphasis on their Capitol Hill Days, during which they meet with lawmakers and their aides to raise awareness about the industry and push for legislation.

But for one brokerage executive, Capitol Hill Day has been going on for almost a year.

Paige Pierce, senior vice president at Larimer Capital Corp., has been leading the effort to pass the Small Business Audit Correction Act, which would ease audit requirements for small brokerages.

This measure was inspired by a letter last November from Alex Lieblong, owner of Lieblong & Associates in Little Rock, Ark., to Sen. Tom Cotton, R-Ark.

Mr. Lieblong said annual audits of his firm now cost about $40,000. That’s because they must be conducted by a firm authorized by the Public Company Accounting Oversight Board, thanks to a provision in the Dodd-Frank financial reform law.

Under the audit reform bill, small brokers who don’t have custody of client funds would be able to return to having their audits conducted each year by a less costly accountant following generally accepted accounting standards.

“It was one of those venting letters,” Mr. Lieblong said. “We’re a very small firm. [A PCAOB audit] is like wanting to do a public audit on a mom-and-pop convenience store. It in no way protects the investor.”

The letter spurred Mr. Cotton to introduce legislation in the Senate. A House companion was written by Rep. French Hill, R-Ark. Both bills have Democratic co-sponsors.

After Mr. Lieblong provided the spark, Ms. Pierce has put in hundreds of hours advocating for the bills. She got involved in the process when Mr. Cotton’s office contacted her. At the time, she was chair of the Financial Industry Regulatory Authority Inc.’s Small Firm Advisory Board.

Over the last year, she has made a dozen trips to Washington and conducted more than 100 meetings with members of Congress and their staff.

The bill was approved by the House Financial Services Committee last month. A House floor vote has not been scheduled. The Senate Banking Committee has not yet scheduled a vote on the Senate version.

“This has been a heavy, heavy lift,” Ms. Pierce said. “We haven’t succeeded yet, but we’ve gotten farther than anyone said we could.”

She has enlisted hundreds of small independent broker-dealers to raise their voices in support of the bill.

“This is all new to us,” Ms. Pierce said. “I’ve been saying to small firms: Look what we can do when we all pull together.”

She was elected to the Finra Board of Governors over the summer. Ms. Pierce’s campaign for the bill is independent of her Finra duties.

Now she is facing a tight deadline to get the bill approved before the current Congress ends after a likely lame-duck session at the end of the year. If the bill dies, it must be re-introduced next year in the new Congress.

“We’re committed to crossing the finish line,” Ms. Pierce said.

Among the challenges ahead is convincing senators that the bill has enough Democratic support, because most Democrats on the House Financial Services Committee voted against it over concerns that PCAOB audits show deficiencies among small brokers.

Ms. Pierce has rounded up audit experts to explain to lawmakers that the deficiencies are related to the wrong type of audit being applied to small, non-custodial brokers.

“We have to say it in a way that is persuasive,” Ms. Pierce said. “I didn’t expect this to be a partisan issue. That’s probably my naiveté.”

Ms. Pierce and her cohorts are doing the tough lobbying themselves. It’s an effort that is much more taxing but ultimately may be more satisfying than one Capitol Hill Day of meetings with lawmakers.

Mr. Lieblong will be watching the results.

“I’m through paying these kind of exorbitant fees,” he said. “If it doesn’t go through, I’ll shut down.”

Related Topics: Financial Industry Regulatory Authority