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Top Republicans to SEC: Shift Resources to ‘Immediately’ Boost Advisor Exams


Top Republicans to SEC: Shift Resources to ‘Immediately’ Boost Advisor Exams

Hensarling and Garrett tell SEC Chief White to inform them by Dec. 5 how the agency plans to reallocate resources, consider possible third-party exams

Two top Republicans on the House Financial Services Committee told Securities and Exchange Commission Chairwoman Mary Jo White in a recent letter to reallocate resources to “immediately” boost the number of investment advisor exams because allowing the SEC to collect user fees from advisors to achieve this same goal is too costly.

In their Nov. 24 letter to White, Committee Chairman Jeb Hensarling, R-Texas, and Rep. Scott Garrett, R-N.J., chairman of the committee’s Capital Markets Subcommittee, said that user fees “will impose significant new costs” on RIAs and that those “added costs will be passed along to their customers in the form of higher advisory fees.”

User fees, the two lawmakers say—who both will resume their current positions in the new Congress—could also have a “disproportionate impact on small and mid-sized” RIAs, making it more difficult to compete with larger firms.

“Increasing costs for small businesses and retail investors and curtailing access to investment advice will directly undermine the SEC’s statutory mission to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation,” the two lawmakers said.

What’s more, the two argue that authorizing the SEC to collect user fees would require the agency to hire “hundreds of additional examiners and enforcement lawyers, with six-figure salaries,” which will also increase costs.

The solution, Hensarling and Garrett write, is for the SEC to reallocate existing agency resources “to immediately increase the amount” of RIA exams. The two cite their Sept. 2013 request that the SEC redirect resources its using to protect “millionaire and billionaire” investors in private funds and to shift “more responsibility” for broker-dealer exams to the Financial Industry Regulatory Authority.

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