The Securities and Exchange Commission's priority is to increase the number of investment adviser examinations it handles every year.
How to do that is another question.
“Significant additional coverage is essential if investors are to be appropriately protected,” SEC Chairman Mary Jo White told lawmakers last Thursday, pointing out that in fiscal 2012, the commission examined just 8% of registered investment advisers, who now number about 11,000.
After the hearing at the House Financial Services Committee, she told reporters that the SEC is agnostic about outsourcing adviser regulation to an industry-funded self-regulatory organization.
NO CONCLUSION
“What needs to happen is, there needs to be more examination coverage of investment advisers,” Ms. White said, reiterating her main point to lawmakers.
“The SEC's not taken a position on whether that should be through an SRO or additional funding for the SEC,” she said. “I don't have a conclusion on that today.”
The SEC is seeking a $1.67 billion budget appropriation from Congress, a 27% increase. It would use part of the funding boost to hire an additional 250 investment adviser examiners.
LACKS RESOURCES
An SEC study in 2011 concluded that the commission lacked the resources to examine the registered advisers it oversees, about 40% of whom it has never visited.
One of the study's recommended solutions was for Congress to authorize an SRO for advisers. Another recommendation was for legislators to allow the SEC to charge user fees to advisers to fund exams.
An SRO bill was introduced last year by Rep. Spencer Bachus, R-Ala., who was then chairman of the House Financial Services Committee. The measure died without a vote by the panel.
Mr. Bachus hasn't pursued SRO legislation this year, but Rep. Maxine Water, D-Calif., ranking member of the committee, re-introduced her SEC user fee bill last month.
