Congress Holds Hearing Concerning Investment Adviser SRO

September 13, 2011

Reading time : 2 minutes

Today, September 13, the House Committee on Financial Services conducted a hearing to discuss forming a self-regulatory organization (“SRO”) for investment advisers.  There were three oversight options discussed,  (1) having the U.S. Securities and Exchange Commission (“SEC”) charge a user fee to provide funds for more frequent regulatory examinations; (2) creating an independent SRO; and (3) giving FINRA the authority to serve as the investment adviser SRO.  Eight individuals testified in front of the House Committee.  The following chart shows which of the three approaches the individuals thought would be most effective.

Name Organizaiton/Employer SEC User Fee Independent SRO FINRA as SRO
William Dwyer Chairman, Financial Services Institue and Managing Director/President of LPL Financial, LLC X
Ken Ehinger President and CEO, M Holdings Securities, Inc., on behalf of the Association for Advance Life Underwriting X
Terry Headly President, National Association of Insurance and Financial Advisors X
Steve Irwin Commissioner, Pennsylvania Securities Commission, on behalf of NASAA X
Richard Ketchum Chairman and CEO, FINRA X
Barbara Roper Director of Investor Protection, Consumer Federation of America X* X*
John Taft CEO, RBC Wealth Management, on behalf of the Securities Industry and Financial Markets Association X
David Tittsworth Executive Director and Executie VP, Investment Adviser Association X

*Barbara Roper stated that the best option would be to supply the SEC with the appropriate funding to improve investment oversight and to increase the frequency of regulatory examinations.  However, she felt this option would not be achieved so she supported forming an independent SRO.

Based upon the testimony of the witnesses and the Congressmen conducting the hearing, the most popular choice is having FINRA serve as the investment adviser SRO.  Those advocating for this approach felt it would be the most effective and cost efficient approach.  However, those advocating for an SEC user fee felt that creating an investment adviser SRO would create an additional layer of bureaucracy.  They also felt that SROs create conflicts of interest because they are run by their members and are accountable to their members, not the general public.

For more information on the hearing and to view the full remarks of each witness, click here.

Posted by Bryan Hill
Labels: SEC, SRO