Finds problematic numerous exemptions for various groups of investment advisers
The Consumer Federation of America opposes proposed legislation that would shift oversight of investment advisers from the Securities and Exchange Commission to a self-regulatory-organization, a representative of the group told the heads of a congressional committee poised to consider the bill on Wednesday.
Barbara Roper, CFA's director of investor protection, said in a letter Monday that her group can't support HR 4624 as introduced by House Financial Services Committee Chairman Spencer Bachus, R-Ala., because it would exempt certain types of advisers, such as those that manage a mutual fund or those with 90% of their funds attributable to charitable funds, hedge funds or retirement plans.
“Its central problem is the numerous exemptions it provides for various groups of investment advisers,” she wrote. “One result is that the largest advisers, and those with the wealthiest client base, will continue to receive direct SEC oversight at no additional cost, while the smaller advisers with less wealthy clients will be subject to a new added expense for regulatory oversight.”
The group would prefer to see the committee consider other ways of improving oversight of investment advisers, such as through adequate SEC funding from taxpayers or user fees charged to the industry, Ms. Roper said in the letter to Mr. Bachus and Massachusetts Rep. Barney Frank, the ranking Democrat on the committee.
“Our preferred approach is for the SEC to be funded to do its job,” Ms. Roper said in an interview. “We are open to considering an SRO but with all of the exemptions in this bill it just doesn’t achieve the stated goal, it doesn’t solve the resource problem or harmonize oversight for all advisers.”
Ms. Roper said first in September that group would support the Financial Industry Regulatory Authority Inc. as an adviser SRO, essentially because it seemed to be the only option under consideration.
In the letter opposing Mr. Bachus' bill, Ms. Roper also criticized the “preponderance of broker-dealer industry witnesses” due to appear at Wednesday's hearing. Ms. Roper said she was not asked to testify at the hearing.
Those set to appear at the hearing include Dale Brown, chief executive of the Financial Services Institute, Thomas Currey, past president of the National Association of Insurance and Financial Advisors, Chet Helck, chief operating officer for Raymond James Financial Inc. on behalf of the Securities Industry and Financial Markets Association, Richard Ketchum, chairman of Finra, John Morgan, a Texas securities commissioner on behalf of the North American Securities Administrators Association and David Tittsworth, executive director of Investment Adviser Association.
In addition to her role at CFA, Ms. Roper is part of a new 21-member investor advisory committee that the SEC formed to advise the commission on a variety of regulatory issues and priorities. That committee was mandated in the Dodd-Frank financial reform law.
