Study Assesses How Much Investment Advisory Firms Would Pay for SEC Exams

According to a study released by compliance consultant RIA in a Box, some investment advisory firms could end up paying millions of dollars in users fees each year to finance exams conducted by the Securities and Exchange Commission. The study addresses a bill that would let the regulator charge fees to cover exam costs. The agency has said that it needs more money to hire more RIA examiners.

The proposed measure is intended to help the SEC enhance its yearly examination rate. Right now, the exam rate is just 9% of the about 11,500 investment advisers that are registered with the agency.

Under the bill, the SEC would determine user fees according to how much it would cost to increase the amount and frequency of registered investment advisers. A firm’s assets under management, risks characteristics, and the number and kinds of clients would also be factored.

The RIA in a Box came up with its calculations by estimating how much more it would cost for the SEC to hire additional RIA examiners. It then allocated the costs among the different firms according to their assets under management. For example, a firm with $2.5 billion in assets under management would likely pay a $14,121 user fee. A firm with $2.35 trillion in assets under management would have a yearly user fee of over $13.2 million dollars.

RIAs that have under $100 million in assets under management do not have to pay a user fee to the SEC. They are registered in their states.

The compliance consultant says that the cost to RIA firms for exams funded by user fees is estimated to be around $310 million. According to ThinkAdvisor, even though the fees might be substantial for some firms, RIA in a Box’s analysis indicates that most of the 32,000 advisers would not be subject to much of (if any) fee. Only approximately 11,500 firms will likely meet the criteria that would obligate them to pay a user fee.

Our investment adviser fraud lawyer represents investors throughout the U.S. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

SEC User Fees Would Have Little Impact on Most Firms: Study, ThinkAdvisor, September 3, 2014

SEC exams could cost RIAs thousands – or even millions, InvestmentNews, September 3, 2014

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