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Home » Finance & Securities Regulation: Library » Newsbriefs

SEC Would Get Dedicated Funding Under Waters Legislation

Date Posted: July 27, 2012

Rep. Maxine Waters, D-Calif., announced July 25 the introduction of a bill that would provide for dedicated funding for the SEC so that the financial watchdog could improve the oversight of investment advisers. The bill, which was announced the same date this newsletter goes to press and did not yet have a bill number, is called the Investment Adviser Examination Improvement Act of 2012, a press release said.

If the law were enacted as written, SEC-registered investment advisers would pay user fees that would be used to defray the costs of inspections and examinations. State-registered advisers would be exempt.

The question over what entity should be directly oversee investment advisers -- SEC or a self-regulatory organization -- has been in hot contention for the past several years, and heated up most recently when Rep. Spencer Bachus, R- Ala., the chairman of the House Financial Services Committee, introduced a bill that would put an SRO in charge of examining SEC-registered investment advisers. The bill, H.R. 4624, got a committee hearing June 6, in which Waters announced she would introduce her own legislation as an alternative to the so-called SRO bill. The idea of an SRO, as opposed to the SEC, is unpopular with advisers and the Investment Adviser Association, along with other industry groups, has fought the bill.

But hours after Waters introduced the Investment Adviser Examination Improvement Act, Crain’s InvestmentNews reported that Bachus told the financial weekly that “his bill is not going anywhere for the moment.”

IAA issued a statement July 25, praising Waters. “This legislation represents the smartest, fastest and most cost-effective solution to ensure greater frequency of investment adviser examinations,” IAA Executive Director David Tittsworth said. “These enhancements to SEC’s current examination program will not require the expenditure of additional taxpayer dollars.”

SEC is a stand-alone agency and is self-funded, but since 1996 it has had to request appropriations through Congress. Unable to set its own budget, the regulator must deposit any user fees it collects into an account at the U.S. Treasury Department. Proponents of an expanded SEC presence over advisers have long argued that enhancing the watchdog’s ability to examine registrants would not cost taxpayers any money. Richard Shelby, R.-Ala., told the New York Times in 2011 that the SEC has a questionable record and that Congress should maintain some authority over its budget.

But Stephen Crimmins, a partner at K&L Gates in Washington, D.C., and a former deputy chief litigation counsel in SEC’s Enforcement Division, told Thompson Publishing Group in March 2011, “The banking agencies have been [budgeting themselves] for years without problems. The banking agencies have continued to be subject to rigorous congressional oversight, and self-budgeting has not in any way diminished that. It’s a success story.”

Waters’ legislation provides that SEC must seek to ensure that it does not collect more user fees than it needs to carry out the additional inspections and examinations in a fiscal year.


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