Adviser Oversight Bill Is Critical

To show its support for the bipartisan Investment Adviser Oversight Act of 2012, Dale Brown, chief executive and president of the FSI, testified before Congress Wednesday and urged the Committee on House Financial Services to approve it.

The bill, co-authored by Rep. Spencer Bachus (R-Ala.), chairman of the committee, and Rep. Carolyn McCarthy (D-N.Y.) calls for a self-regulatory organization (SRO) to oversee financial advisers. (See “Bipartisan Bill Seeks Expanded Oversight of Advisers.”)

Calling regulatory structure for financial advisers “a critical component to building and maintaining the trust of American savers and investors,” FSI said the bill should be approved to protect Americans who need investment advice. Advisers are now overseen by the Securities and Exchange Commission (SEC).

The bill would shift responsibility for adviser examinations from the SEC to an independent regulator paid for by the industry, freeing the commission to regulate the regulator, as it has done for decades for the brokerage and municipal securities industries, among others, Brown pointed out.

“A middle-class family that wants professional help with investing their kids’ college fund has no real way of knowing if someone is checking up on their investment adviser,” Brown noted. “[The Financial Industry Regulatory Authority] FINRA might have audited their adviser in the last two to three years. Or that adviser might not have seen an SEC examiner since 1999—if at all. American investors should not have to be regulatory experts to know whether they are being protected.”