Wednesday, September 16, 2009

The Power Grab Continues

It seems like everyone is trying to gain power and control using the Madoff Mess as a justification. The North American Securities Administrators Association (the state securities commissioners) is pushing for authority over all investment advisors who manage less than $100 million in assets.

Today they only have authority over those with less than $25 million in assets, and if this power grab is successful, it will be one giant step backwards for the securities industry and the investing public. We spent decades attempting to consolidate regulators so that large national firms did not have to deal with 50 state regulators. The move to divide investment managers into state vs. SEC registrations was part of that consolidation process. The $25 million dollar cut off left the smaller RIAs with the states. Since smaller RIAs only need to register with a handful of states, that division made sense.

By increasing their jurisdiction there will be a significant increase in RIAs who need to be state registered, and those RIAs will have to register in all 50 states, and make filings in all 50 states, and comply with the rules and regulations in all 50 states. Not only do the states have different rules and filing requirements, the cost of maintaining registrations will increase dramatically.

At the same time, the SEC is simply not going to be able to oversee all of the new RIAs if pending legislation passes. The SEC has clearly demonstrated its inability to oversee the regulated entities that it is currently responsible for. If we are going to have meaningful regulation of investment advisers, a new entity needs to be created, similar to FINRA, or the SEC needs significantly more staffing and funding. Turning the regulation over to 50 state regulators will be a nightmare, one that we finally removed years ago.

Post a Comment