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House Financial Services Committee Hears Arguments Over Who Should Oversee Investment Advisers
Last week, the House Financial Services Committee held a hearing about the Investment Adviser Oversight Act of 2012, a bill introduced by the committee’s chairman, Rep. Spencer Bachus (R-Ala.), and Rep. Carolyn McCarthy (D-N.Y.). The two lawmakers had come up with (HR 4624) because they believe that the US Securities and Exchange Commission, which has been supervising investment advisers, doesn’t have the resources to do this job effectively.
While there has long been discussion over this issue, the 2008 financial crisis and the discovery of Bernard Madoff’s multibillion-dollar Ponzi scam, which had been going on for years, served to some as evidence that the SEC wasn’t doing a thorough enough job of detecting financial fraud. Last year, the Securities and Exchange Commission issued a study acknowledging that its resources were limited. It too recommended that the Financial Industry Regulatory Authority or a new SRO be given the responsibility of overseeing investment advisers. Or, if it were to continue this oversight, then the Commission suggested that it work with an enhanced oversight program paid for with user fees.
While all sides involved in the debate are in agreement that registered investment advisers are not being examined on a regular basis, they can’t seem agree on how to make additional exams happen or on who should facilitate them. Unlike broker-dealers, investment advisers don’t have a self-policing group. They are usually examined by the states or the US.