Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, August 6, 2012

Debate over Adviser SRO Heats Up Again

Representative Spencer Bachus, Chairman of the House Financial Services Committee, has an op-ed piece in today's Wall St. Journal called "Financial Advisers, Police Yourselves," in which he calls for support of the Investment Adviser Oversight Bill that would authorize the establishment of one or more SROs to supplement the SEC's examinations for investment advisers.  The alternative that has been floated is allocation of additional funds so the SEC can conduct more exams.  Rep. Bachus, in response to this, states:

But the SEC has informed Congress that even if it received increased funding this year, it would be able to examine only one in 10 investment advisers annually. This is unacceptable.

Additionally, this approach ignores the SEC's poor track record leading up to the financial crisis. The SEC failed to protect investors and detect fraud even though evidence about the Madoff and Stanford Ponzi schemes was handed to them by insider informants on a silver platter.

As Investment News notes, on July 25 Rep. Bachus suspended his bill after Rep. Maxine Walters introduced a bill that would allow the SEC to charge advisers user fees to fund exams and said that no legislation would move forward until consensus was reached.  Representatives of the investment adviser industry expressed disappointment with Mr. Bachus's statement.  Inv News, Game on: Bachus reopens SRO debate, snipes at advisers

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