Results of Massachusetts Securities Division Survey Finds Heavy Toll if New Investment Adviser SRO Adopted

June 06, 2012

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 The Massachusetts Securities Division (“Division”) recently conducted a survey to determine the possible impact of the proposed Investment Adviser Oversight Act of 2012 (“Investment Adviser Oversight Act”) which was introduced in the United States House of Representatives by Representative Spencer Bachus (R – AL) Chairman of the Financial Services Committee. If enacted the Investment Adviser Oversight Act would create a self-regulatory organization (“SRO”) for investment advisers. The Massachusetts Securities Division’s survey was sent out to 649 investment advisers, and the Division received 353 surveys back. Responses came from a wide spectrum of investment advisers in the state.

 According to the report filed by the Massachusetts Securities Division, the survey reflects the “demographic of the typical Massachusetts registered investment adviser.” Most investment advisers reported less than $30 million in assets under management, “95% had fewer than 5 employees, and about half generate revenues less than $50,000 per year.”

The results of the survey indicate that investment advisers in Massachusetts strongly oppose the institution of an SRO. Results revealed that “98% of the investment advisers believe the Investment Adviser Oversight Act would have a negative financial impact on their firm because of fees incurred joining the SRO”. Investment advisers disclosed that they would be less likely to hire new employees and retain current employees if they have to pay the additional fees.

The most telling number of the survey was that 41% of the investment advisers said the fees associated with joining the SRO could put them out of business (assuming the average cost per member of an SRO for investment advisers to be $10,000-$35,000 per year which is much higher than the $300 a year to register with the state of Massachusetts).

Posted by Bryan Hill
Labels: SRO