Friday, December 07, 2012

Rep. Waters Elected Ranking Member on Financial Services Committee for 113th Congress, Vows to Defend Dodd-Frank and Reform GSEs

Rep. Maxine Waters (D-CA) has been elected by the House Democratic Caucus as the Ranking Member of the Financial Services Committee in the 113th Congress, replacing the retiring Rep. Barney Frank (D-MA). Rep. Waters vowed to defend and implement the Dodd-Frank Act and to work with Committee Chair-designate Jeb Hensarling (R-TX) to pass legislation reforming the government-sponsored entities.

On the issue of how best to regulate and inspect SEC-registered  investment advisers, Rep. Waters opposed the creation of an SRO for investment advisers, a position espoused by Committee Chair Spencer Bachus (R-AL) in favor of raising fees on advisers to pay for more SEC inspections. The Committee is trying to address a situation in which the SEC currently examines approximately eight percent of investment advisers annually out of approximately 11,000 advisers registered with the Commission.

Rep. Waters introduced the Investment Adviser Examination Improvement Act of 2012, H.R. 6204, which provides a dedicated funding source to the SEC to pay for a robust investment adviser oversight program, consistent with a recommendation in an SEC staff paper required under Section 914 of the Dodd-Frank Act. Rep. Waters called H.R. 6204 the approach that provides the simplest, most efficient solution to the problem of inadequate oversight of investment advisers.

The bill would direct the SEC to collect an annual fee from registered investment advisers to defray the cost of SEC inspections and examinations. The bill would exempt state-regulated investment advisers from the requirement to pay an annual fee.

H.R. 6204 also declares the sense of Congress that the SEC should increase the number and frequency of examinations of investment advisers.

The legislation prescribes a fee calculation formula and requires the SEC to make the formula publicly available on its website along with the factors used to reach the fee determination. The Comptroller General would have to audit biennially the use of such fees, SEC reviews of the fee formula, and any adjustments to it.

Section 914 mandated an SEC staff study, which resulted in the SEC offering Congress three options: 1) authorize the SEC to impose user fees on SEC-registered investment advisers to fund their examinations by the SEC’s Office of Compliance Inspections and Examinations; 2) authorize one or more SROs to examine, subject to SEC oversight, all SEC-registered investment advisers; or 3) authorize FINRA to examine dual registrants for compliance with the Investment Advisers Act. In the view of Chairman Bachus, of the three, an SRO for investment advisers is the most comprehensive and streamlined approach to address the regulatory weakness.

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