IAA Alert: June 1, 2017 - IAA Urges New SEC Chairman to Address Adviser Regulatory Priorities


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IAA Urges New SEC Chairman to Address Adviser Regulatory Priorities

June 1, 2017: The IAA has sent a letter to SEC Chairman Jay Clayton highlighting the many regulatory challenges affecting investment advisers, and offering to work with the agency as it looks for ways to make its regulatory oversight of asset managers more efficient and effective.

The letter from IAA President & CEO Karen Barr focuses on three main areas: identifying regulations for retrospective review that could be made significantly more effective and efficient, reiterating the IAA’s position on certain outstanding SEC proposed rules, and offering views on the ongoing regulatory debates involving investment advisers where there is a potential for additional regulation. These three main areas are discussed below:

First, as part of its retrospective review of existing regulations, the IAA letter recommends that the Commission conduct a more realistic assessment of the impact of regulations on smaller advisers, reconsider the prohibitions on testimonials and past specific recommendations under the Advertising Rule, clarify the needlessly complex strict liability provisions of the Custody and Pay-to-Play Rules, and facilitate electronic delivery of required disclosures. The IAA letter also recommends that the Commission promote capital formation by reassessing certain rules relating to private offerings, such as the definition of accredited investor.

Second, the IAA letter reiterates the IAA’s views on rules that have been proposed but not yet acted upon, including rules that would address business continuity and transition planning, the use of derivatives by registered investment companies, and incentive-based compensation practices by very large advisers.

Finally, the IAA letter addresses several ongoing regulatory debates involving investment advisers. Most notable among these is the multifaceted issue of investment adviser oversight through examinations and the recurring discussion of a self-regulatory organization (SRO) for our industry, which the IAA has long advocated against. The letter outlines the IAA’s position on the feasibility of externalizing some portion of the SEC’s oversight function through mandated third-party compliance assessments. The IAA letter also emphasizes the importance of maintaining the existing fiduciary duty of investment advisers.

In addressing each of these areas, the IAA letter urges the SEC to adhere to the overarching principle of making regulations efficient, effective, and appropriately tailored to the stated objective. The letter also urges the Commission to apply more robust and comprehensive cost-benefit analyses to regulations, both new and old, consider alternative approaches to regulation, and factor in the cumulative impact of all regulations affecting investment advisers.

The IAA invites feedback from its members on regulatory priorities. For questions regarding the IAA letter or to provide feedback, please contact a member of the IAA legal team.

The full letter is available here. A comprehensive report on the IAA letter appears on the cover of the June IAA Newsletter.

IAA members can visit the IAA Alert page in the Members Only section of our website or contact staff for more information.

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