Category Archives: Investment Adviser Oversight

Coalition Statement on SEC Chair Mary Jo White’s Testimony Before the House Financial Services Committee

The Financial Planning Coalition applauds Securities and Exchange Commission (SEC) Chair Mary Jo White’s decision to direct SEC staff to develop a rule to establish a uniform fiduciary standard of conduct for broker-dealers consistent with the current standard for registered investment advisers:

“A uniform fiduciary standard of conduct for broker-dealers is a long overdue investor protection, and will close the harmful gap between advice provided by investment advisers under a fiduciary standard and the merely ‘suitable’ advice currently required from broker-dealers. We urge the SEC to act swiftly to move forward with this well-researched proposal, which will protect Americans from potentially detrimental investment advice not delivered in their best interest.”

Congress authorized the SEC to adopt a uniform fiduciary standard under the Dodd-Frank Act nearly five years ago, and SEC staff first recommended the adoption of a fiduciary standard four years ago, allowing for ample research and careful consideration of this investor protection measure. Regarding Chair White’s request that SEC staff also prepare recommendations on third-party examinations to supplement the Commission’s existing examination program, the Coalition believes:

“New proposals regarding investment adviser oversight, specifically third-party examinations, have yet to undergo the level of thorough discussion and scrutiny that informed Chair White’s decision to move forward with fiduciary rulemaking. We encourage Chair White and the SEC to carefully consider all of the options for making necessary improvements to adviser oversight – including user fees – before proceeding. Oversight and examinations are a critical part of the SEC’s investor protection mission, and measures for improving this program merit further research.”

Coalition Statement on President Obama’s Proposed FY 2016 Budget

The Financial Planning Coalition issued the following statement regarding President Obama’s FY 2016 budget proposal:

“The Financial Planning Coalition is pleased that President Obama addresses the current and persistent underfunding of the SEC in his 2016 budget proposal, once again requesting $1.7 billion. While Congress modestly increased the SEC’s budget for 2015, the agency’s funding remains woefully inadequate, impeding its oversight and examination of investment advisers. We urge lawmakers to support greater investor protection by adequately funding the SEC.”

Financial Planning Coalition Statement on Hensarling and Garrett User Fees Letter

The Financial Planning Coalition issued the following statement regarding the letter from House Financial Services Committee Chairman Jeb Hensarling (R-TX)and Rep. Scott Garrett (R-NJ), chairman of the committee’s capital markets subcommittee, to Securities and Exchange Commission (SEC) Chair Mary Jo White regarding the costs of proposed user fees to increase investment advisor oversight:

“While we are pleased that Chairmen Hensarling and Garrett recognize there is a problem resulting from the lack of investment advisor examinations, we strongly disagree that merely asking the SEC to reallocate its stretched and inadequate resources or outsourcing examinations to third parties is the solution. Chairmen Hensarling and Garrett’s recent letter opposing user fees ignores a well-documented Boston Consulting Group economic analysis that shows that user fees are the most cost-effective solution to increasing examinations. Current legislation authorizing the SEC to assess user fees is supported by the very industry it would affect, has no impact on the American taxpayer and is scalable to address any small business concerns.

“In Washington there is a tendency to make complex what should be simple. The simplest and most cost-effective solution that will in fact protect investors is to enable the SEC – the expert agency on advisor regulations – to increase examinations with very strong support of advisors and at no cost to taxpayers. We will continue to work to encourage the 114th Congress to embrace the user fee solution.”

Financial Planning Coalition Statement on FINRA Investor Protection Survey

The Financial Planning Coalition issued the following statement regarding a recent FINRA survey that confirms the findings from original research conducted by the Financial Planning Coalition. Both FINRA and the Coalition’s findings indicate that investors support more government oversight of investment advisers and appropriate regulation to safeguard themselves from adviser misconduct.

“The Financial Planning Coalition urges Congressional leaders to make investor protection and the provision of ethical financial advice priorities in 2015. Providing the Securities and Exchange Commission’s (SEC) with the funding it needs to fill dangerous gaps in investment adviser oversight should be Congress’ first order of business. In the absence of this increased funding, however, Congress should pass bipartisan legislation authorizing the SEC to collect user fees from registered investment advisers in order to increase the alarmingly low frequency of examinations.”

SEC Investor Advocate Makes Case for User Fees

This week, Rick Fleming, the SEC’s Investor Advocate, delivered a speech at the Southwest Securities Conference in Dallas, Texas.  In his remarks, Fleming described the newly created Office of the Investor Advocate, created under the Dodd-Frank Act, and the core issues impacting investors that the office will focus on during its inaugural year.  In addition, Fleming acknowledged the need to provide the SEC with sufficient funding to “conduct an adequate number of investment adviser examinations,” going so far as to recommend Congress authorize the SEC to collect user fees as a long-term solution to funding RIA examinations.  The following is an excerpt from his speech, the full text of which can be found here.

“As many of you are aware, the SEC examined only about 9 percent of registered investment advisers in Fiscal Year 2013. This equates to a frequency of approximately once every 11 years, a rate that many observers find unacceptable.

“There are multiple reasons for the lack of exam coverage, but in my view it primarily boils down to the fact that the SEC has not received sufficient resources to keep up with the burgeoning workload. The number of SEC-registered advisers has grown by approximately 40 percent over the past decade to nearly 11,500 today. And, as the number of investment advisers has grown, so too has their complexity. The amount of assets managed by investment advisers is on a steep ascent, climbing from $20 trillion a decade ago to an estimated $55 trillion by the end of Fiscal Year 2015. In comparison, staff in the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has grown only about 10 percent in the past decade.

“From my own personal experience, I know that investors are exposed to fraud and abuse when regulators cannot maintain an adequate regulatory presence. While most investment advisers are trustworthy and honest, I have personally prosecuted one who stole more than $7 million from his clients. In the course of that case, I met with numerous victims who did everything right – they worked hard, saved their money, and entrusted their savings to a licensed person who they thought was investing it in a normal portfolio of legitimate securities – only to have their life savings taken by that licensed “professional.” For those investors, an ounce of prevention would have been worth far more than the pound of cure. With their money gone, a maximum prison sentence did little to help those retirees who had to return to work or face a diminished standard of living, or the individual with diminished capacity whose trust fund was stolen, or the church that lost its building fund.

“Not surprisingly, then, as my very first recommendation to Congress, I recommended that Congress appropriate the needed funds this year so that the Commission can hire more examiners without further delay. In addition, I voiced support for a more long-term, sustainable solution. I recommended that Congress authorize the SEC to collect an annual “user fee” from registered investment advisers and to limit the use of those funds to expenses associated with investment adviser examinations.

“Admittedly, a shorter examination cycle won’t stop all fraud, but I believe it will allow the SEC to halt these types of activities sooner and will provide a stronger deterrent to advisers who might otherwise succumb to the temptation to steal. It will also curtail other unethical practices, including excessive fees, excessive trading, and undisclosed conflicts of interest. Many of you in this room have uncovered these types of practices and can attest to the damage it causes to investors.”

Financial Planning Coalition Applauds Rep. Bachus’ Co-Sponsorship of H.R. 1627

Washington, D.C. – The Financial Planning Coalition applauds Rep. Spencer Bachus (R-AL), the Chairman Emeritus of the House Financial Services Committee, for becoming a co-sponsor of H.R. 1627, the Investment Adviser Examination Improvement Act.

This bill, introduced by Financial Services Committee Ranking Member Maxine Waters (D-CA) and Rep. John Delaney (D-MD), would authorize the Securities and Exchange Commission (SEC) to collect reasonable user fees from SEC-registered investment advisers for the sole purpose of increasing the dangerously low number of examinations the SEC currently conducts.

“We commend Rep. Bachus’ decision, as well as the decisions of the 14 additional Members of Congress who have recently signed on as co-sponsors of this important investor protection measure,” said the Coalition. “This support demonstrates that investor protection is not a partisan issue and we expect to see the number of co-sponsors on both sides of the aisle continue to grow.  Further, their decisions highlight that a user fee is a sensible solution to the vexing resource problem at the SEC – a solution that industry supports and that has no impact on the federal budget.  We look forward to continuing to support this legislation and to working with all Members of Congress who want to improve protections for American investors.”

The Financial Planning Coalition is a strong supporter of H.R. 1627 as the most cost-effective, efficient and industry-supported way of providing the SEC with the necessary resources to protect American investors – particularly in light of Congress’ failure to appropriate sufficient funds.  Due to a chronic lack of resources, the SEC currently is able to examine only about nine percent of the approximately 11,000 investment advisers registered with the agency.  This amounts to investment advisers being examined at the unacceptable rate of about once every 11 years.

H.R. 1627 is a targeted solution to the persistent resource gap at the SEC that would: 1) limit the use of collected fees to the SEC’s examination program; 2) require that the SEC determine the fees through a public rulemaking; 3) require the SEC to take into account factors such as the investment adviser’s size and assets under management when determining a fee; and 4) require the Comptroller General to conduct an audit of the funds’ use every two years.