SEC Investor Advisory Committee Approves Fiduciary, User-Fee Plans

As White noted in a recent speech, five years after the financial meltdown, approximately 40% of SEC-registered investment advisors (who collectively manage $50 trillion) still have not received their first SEC examination.

"We're going to tread water if we're looking for an appropriation" from Congress to help boost advisor exams, Goettsch said. "I'm guessing the [user-fees] cost will be passed on to clients eventually, but we're talking about firms with more than $100 million" in AUM. The lack of advisor exams "is a ticking time bomb if we don't address it."

Indeed, Roper added that the legislation "allows fees to be assessed so that it adjusts the burden of the fees to the size of the firm." While the investor subcommittee "supports any number of different ways to solve this [advisor exam] problem, this user-fees [legislation] seems like the most doable of the options. There's no reason it should be a partisan issue."

Andrea Seidt, president of the North American Securities Administrators' Association, noted in a statement after the Investor Advisory Committee meeting that "by authorizing the SEC to use revenue derived from the self-funding of examinations to augment [the Office of Compliance Inspections and Examinations'] exam program, the legislation recommended by the IAC would permit the SEC to establish and maintain a robust advisor examination program that periodically adjusts to correspond to changes in its examination responsibilities."

While the SEC has requested that Congress provide the agency more funding so that it can add 250 more examiners, which Seidt says is "the easiest and least expensive way" to address the problem, a user-fees bill "would appear to create a viable, long-term solution to a problem that has plagued the SEC for decades."

While the SEC is not bound by any recommendations of the Investor Advisory Committee, Section 911 of the Dodd-Frank Act requires the SEC to "promptly issue a public statement assessing the finding or recommendation of the committee," and to disclose any action the commission intends to take regarding that recommendation.

White noted that since the committee's last meeting and recommendation, the committee has gotten a letter from SEC staff regarding its proposal to require "glidepath" illustrations in target-date funds. In recent months, White said, the Division of Investment Management has said it would be useful to request additional comments on the advisory committee's proposal. "I'm hopeful that target date funds will be included in the commission's rulemaking in the coming year," she said.

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