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Opening Statement: Hearing on HR 4624 - the Investment Advisors Oversight Act of 2012

January 11, 2013
Committee Remark

Thank you, Mr. Chairman, for holding this hearing this morning.  It is absolutely essential that we improve the oversight of investment advisers – the people that manage the assets of millions of individual and institutional investors across the country. 

Let me first say that I appreciate the good faith effort on the part of the Chairman to improve the frequency of examinations of investment advisers with his bill, HR 4624.  It seems as if everyone agrees that the status-quo is not acceptable over the long-term; additional resources are needed to improve oversight of this industry.

With that said, I must say that my preference is to provide adequate government funding to fulfill what I think are essential government functions. 

That is why I'm drafting legislation to allow the SEC to collect user fees to enable the examination of investment advisers.  This is consistent with one of the recommendations in the SEC's Section 914 study under Dodd-Frank, and is the option I believe is best suited to address the challenge of inadequate regulation.

First, I believe that a user fee approach is the simplest, most efficient solution that provides the most transparency to the public.  Also, provided that these user fees are only used to fund the regulation of investment advisers, and not to subsidize other functions at the SEC, I think that this option would be more cost effective for the industry. A reasonable user fee assessed by the SEC would be, by many accounts, less than one assessed by a self-regulatory organization (SRO). 

Besides the costs on the industry, I'm concerned about the costs to the SEC to oversee the activities of a new SRO, particularly in light of all the other responsibilities we've placed on the SEC under Dodd-Frank.

Finally, with regard to the role of state securities regulators, given that the changes we made under Dodd-Frank to expand the role of the states are just about to take effect, I think it would be unwise to now establish a SRO and have it looking over the states' shoulders.  The states have been preparing for two years for the changes we made under Dodd-Frank, and I think now would be the wrong time to subordinate their authority to a new SRO.

I look forward to hearing more about the legislation under discussion today, and I hope for continued dialogue with my colleagues as I move forward on my user fee alternative proposal.

Thank you, I yield back.