House Financial Services Committee Advances Investor Protection Act

November 06, 2009

Here’s our update regarding proposed changes to the regulation of investment advisers.

The Financial Services Committee of the U.S. House of Representatives advanced H.R. 3817, the Investor Protection Act, out of committee yesterday. According to the Financial Services Committee’s press release, key provisions of this bill include the following:

  • an independent study of the regulatory structure for the securities industry;
  • a doubling of the authorized fund for the U.S. Securities and Exchange Commission (“SEC”) over five years;
  • a requirement that every financial imtermediary who provides advice will have a fiduciary duty towards the customer; and
  • an authorization for the SEC to prohibit mandatory arbitration provisions in customer contracts.

Although there was no reference in the Financial Services Committee’s press release concerning the amendment to H.R. 3817 approved last week, which raises assets under management requirement from $25,000,000 to $100,000,000, this amendment will effectively result in many registered investment advisors being regulated at the state instead federal level.

Investment News is reporting that H.R. 3817 advanced out of committee with the controversial amendment that gives Financial Industry Regulatory Authority (“FINRA”) regulatory authority over registered investment advisors, which are also dually registered as broker-dealers. According to Investment News, Financial Services Committee Chairman opposes this provision and will offer an amendment during the floor debate to strip out this provision from H.R. 3817.

Once the House releases a mark-up of H.R. 3817 as passed out of committee, RIA Compliance will share with its readers additional details about the proposed legislation.

Posted by Bryan Hill
Labels: Arbitration, Fiduciary, SEC, SRO