RIA Compliance Blog
Another large group in the financial service industry has come forward to oppose authorizing the Federal Industry Regulatory Authority (FINRA) to become the self regulatory organization (SRO) for investment advisers. The American Institute of CPAs (AICPA) has voiced its desire to keep the oversight of investment advisers with the Securities and Exchange Commission (SEC).
The AICPA is the world’s largest association representing the accounting profession. It is interested in the oversight of investment advisers because a number of its members work for firms that are registered or affiliated with a registered investment adviser. Members also provide audit, tax, retirement consulting, plan administration and financial planning services to their clients.
In stating AICPA’s opposition to FINRA as SRO, CEO Barry Melancon stated, “We believe that the SEC’s core mission to protect investors requires adequate regulation of the investment advisory profession. The SEC remains the proper regulatory body to protect the public’s best interest. Providing the SEC with resources to properly enforce their rules is the best solution for investors and the public.”
As discussed in a previous blog, the Investment Adviser Act of 2012 was recently introduced in Congress, causing debate over what entity should oversee and regulate investment advisers. The SEC released a staff report in January, 2011, which concluded that the current SEC-registered investment adviser examination programs faced significant capacity and funding challenges. The report recommended three options for oversight: (1) impose “user fees” to enable the SEC to continue oversight, (2) create a new SRO, or (3) authorize FINRA to become the SRO for both investment advisers and broker-dealers.
A study was released by the Boston Consulting Group (BCG) late last year to estimate the cost of each option suggested by the SEC. We have previously discussed these results in BCG Report Claims FINRA Cost Will Exceed SEC Cost as RIA SRO. The study concluded that it would cost twice as much to authorize FINRA to become the SRO than if the SEC continued oversight. It also found that creating a new SRO would be the most expensive option.
This is not the first large group that has had a negative reaction to the bill. We previously discussed that the Investment Advisers Association’s (IAA) opposition to the current bill in IAA Becomes More Outspoken as SRO Redraft Nears.
Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds and issuers of securities, among others. Our regulatory practice group assists financial service providers with the complex issues that arise in the course of their businesses, including compliance with federal and state laws and rules.