FPANJ Issues and Positions - Financial Planning Coalition Support
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Financial Planning Coalition Support:

The Financial Planning Coalition is comprised of Certified Financial Planner Board of Standards (CFP Board), the Financial Planning Association® (FPA®), and the National Association of Personal Financial Advisors (NAPFA).

Dodd-Frank Section 914: Enhancing Investment Adviser Oversight

WASHINGTON, DC (April 25, 2012) – The Financial Planning Coalition released the following statement in response to the introduction of the Investment Adviser Act of 2012, sponsored by House Financial Services Committee Chairman Spencer Bachus and Representative Carolyn McCarthy: “While we agree with Chairman Bachus that better oversight of investment advisers is needed, we oppose the legislation introduced in the House of Representatives. As a recent Boston Consulting Group study found, outsourcing SEC oversight to a new SRO (self-regulating organization) would be twice as expensive as directing adequate resources to the current SEC oversight program. Building on the SEC’s existing infrastructure and experience is a better option than creating an added layer of regulation, and could be accomplished more quickly and effectively, and at far less cost. Also a  recent survey of Investment Advisers by the Massachusetts Securities Division showed the impact of an SRO was firm's were less likely to hire or retain staff members.  The study also showed many small adviser firms in Massachusetts would be put out of business if an SRO solution were adopted.

Background on Section 914.  The proposed IA SRO was one of three options  recommended by the SEC in a Study under Section 914 of Dodd-Frank (“SEC  914 Study”) to increase the frequency of examinations of investment advisers, which currently average about once every eleven years. The Study also recommended: (1) authorizing the SEC to collect user fees to enhance its oversight of investment advisers; and (2) authorizing FINRA to examine dually registered broker-dealer and investment adviser firms for compliance under the Investment Advisers Act of 1940. Missing from the SEC’s Section 914 Study and from the debate and testimony associated with the original SRO proposal from Rep. Bachus was any hard data related to the cost of the options for enhancing investment adviser oversight.
Boston Consulting Group Study.  The Financial Planning Coalition, in collaboration with other organizations, addressed this lack of data by engaging BCG to conduct an economic analysis of the options that the SEC recommended to Congress. BCG modeled the annual costs of an enhanced SEC oversight program as well as the costs of a FINRA-IA SRO and a New-IA SRO. BCG assumed that for all scenarios, investment adviser examinations would be increased to once every four years. BCG found that creating an SRO for investment advisers would likely be twice as expensive as funding an enhanced SEC examination program and membership fees for an SRO would be twice as expensive for investment advisory firms as user fees for an enhanced SEC examination program.

Dodd-Frank Section 913: Fiduciary Standard for Personalized Investment Advice

The Financial Planning Coalition, in collaboration with Consumer Federation of America (CFA), AARP, the Investment Adviser Association (IAA) and Fund Democracy, submitted a letter to the SEC on March 28, 2012 with a proposed roadmap for the development of rule that would establish a uniform fiduciary duty for broker-dealers and investment advisers. The letter proposed a compromise framework for the rulemaking that started with a framework proposed by Securities Industry and Financial Markets Association (SIFMA) in July 2011. The letter highlighted areas of agreement with SIFMA’s proposed framework and offered alternative policy approaches where we disagreed.

Links:

Financial Planning Coalition Announces United Opposition to Legislation Creating an SRO for Investment Advisers
http://www.financialplanningcoalition.com/docs/assets/EAC07EDD-E7A0-7427-B20E79D7FD969AEC/SRO_for_Investment_Advisers.pdf

Bob Veres on Bachus/McCarthy Bill:
http://advisorperspectives.com/newsletters12/How_to_Respond_to_the_Bachus-McCarthy_Bill.php

Report  On The Potential Impact Of The Investment Adviser Oversight Act of 2012 On Small Advisers
http://www.sec.state.ma.us/sct/sctpdf/Report_on_IA_Impact.pdf



 

 

 

 

 

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