The Securities and Exchange Commission (“SEC”) recently created the Office of the Investor Advocate “to ensure that the concerns of investors are appropriately considered as decisions are being made and policies are being adopted at the Commission, at self-regulatory organizations, and in Congress.” This week, Rick A. Fleming (“Fleming”), Investor Advocate of the Office of the Investor Advocate (the “Office”), spoke at the 38th Annual Southwest Securities Conference in Dallas, Texas regarding his plans to implement the Office’s initiatives.
In his speech, Fleming described his recent recommendation to Congress to increase resources for exam coverage. In 2013, the SEC only examined approximately 9% of registered investment advisers. Fleming sees this lack of exam coverage as a “substantial risk to investors.” Fleming hopes to increase funding for hiring examiners to administer exams by requesting appropriations from Congress. He also is seeking authorization from Congress for the SEC to collect an annual user fee from registered investment advisers to help pay for resources needed to conduct examinations.
Fleming goes on to explain that investment advisor advocates in support of increased examinations “recognize that a rogue adviser not only harms investors but also leaves a stain on the advisory industry, so they support an increased regulatory presence and are willing to pay for it.” He acknowledges critics who say that the SEC’s budget already has increased substantially. According to the SEC’s Fiscal Year 2011 and 2015 Congressional Budget Justification, the Office of Compliance Inspections and Examinations budget increased from approximately $208 Million in 2009 to $271million in 2013. Fleming counters by explaining that the growth in the number and complexity of registrants has not kept pace with the budget.
There was no mention of what the amount of the fee might be or how it would be determined. Core Compliance will continue to report as additional information becomes available.
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