Make Your Opposition Heard
Are you ready for the fate of your advisory practice to be subject to the broad rulemaking and inspection authority of a quasi-governmental, private regulator? How about a regulator with a track record of a lack of accountability, lack of transparency, weak track record of enforcement, and excessive operational costs that is not subject to effective oversight by either the SEC or Congress? One that is not subject to statutory safeguards, such as the Freedom of Information Act, and lacks the expertise to regulate investment advisers?
That could well be the fate of Registered Investment Advisers under The Investment Adviser Oversight Act of 2012 (H.R. 4624), introduced by Committee Chairman Spencer Bachus (R-Ala.) on April 25. The bill would mandate SRO membership for SEC-registered advisers, subject to exclusions for certain advisory firms (i.e., firms with 90% AUM in mutual funds, private funds, or qualified purchasers, including clients with $5 million in investments). FINRA is lobbying to be that SRO.
In the first quarter of 2012, FINRA spent $800,000 on lobbying, according to the Center for Responsive Politics. Opposing that level of monetary influence requires a lot of grass roots efforts, which is why the NAAIM board of directors is urging its members to write to their Congress men and women and get the word out to other investment advisers of the need to oppose this legislation.
One resource available to the NAAIM members in learning more about the Oversight bill and talking points is the Investment Adviser Association. The association has made available to the NAAIM membership its materials opposing H.R. 4624, including a tentative letter to send to your congressional representatives.
How can you make a difference? Email your Senators and Representatives asking their support in opposing the bill. Encourage other advisers to email their Senators and Representatives. Send multiple messages, each with a different argument. While the IAA letter is a start, customize the letter and message to reflect your experiences. Tell personal stories. Explain how this could impact your advisory firm, the potential costs for the bill (see research from the Boston Consulting Group which found that the annual cost of an SRO operated by FINRA that inspects advisers on average once every four years would be $550-610 million).
While investment adviser oversight may be desirable, turning advisers over to FINRA’s jurisdiction is not the right solution.
Below are links to the IAA resources:
(1) A public page on the IAA web site that has numerous documents related to these issues (including IAA testimony and comment letters, the SEC 914 report and BCG report, media articles, and numerous other documents, including the CATO Institute’s brief filed with the U.S. Supreme Court late last year, the report from the U.S. Chamber of Commerce from last summer, comment letters filed by other organizations opposed to expanding FINRA’s authority, and other relevant materials).
(2) Sample letter to congressional representatives expressing opposition to H.R. 4624 - http://www.capwiz.com/iaa/issues/alert/?alertid=61242741&type=CO
Each member has a web site with a simple to use email comment form. It is tremendously important that you express your concerns on this proposed legislation. It will impact the future of your advisory firm. Make certain your legislators understand the issues, the potential cost and how it will affect your clients.
For more information, or if you would like to help NAAIM’s efforts to oppose the Oversight bill, contact:
Flexible Plan Investments Ltd
3883 Telegraph Rd., Ste. 100
Bloomfield Hills MI 48302