IAA Advocacy Priorities

Investment Advisers Act

The statutory framework of the Investment Advisers Act of 1940 has proven remarkably robust in protecting investors and in allowing the advisory profession to grow to benefit clients, the capital markets and the American economy. However, the financial services landscape has evolved significantly over the last 75 years, and certain of the Advisers Act’s provisions have not kept pace with these developments. The IAA supports efforts to update the Investment Advisers Act of 1940, including through a retrospective review of the regulatory regime governing investment advisers to ensure that regulation is effective, efficient, tailored, and appropriately targeted to protecting investors and fostering capital formation.

Among other things, we support repeal of the advertising rule’s prohibitions of testimonials and past specific recommendations for advertisements, relying instead on well-established anti-fraud standards. We also support clarification of the needlessly complex custody rule to facilitate advisers’ compliance and more effectively address investor protection concerns regarding safeguarding client assets and preventing adviser misappropriation of client assets. We also recommend that the SEC review the recordkeeping rules in light of modern technology and the so-called “pay-to-play” rules on political contributions.

Fiduciary Standard

The IAA has long advocated that all financial professionals who provide investment advice about securities to clients, including advice about retirement accounts, should act as fiduciaries – that is, they should be subject to a legal obligation to act in the best interests of their clients and place their clients’ interests before their own.

Given that core belief, we support the goals underlying the DOL fiduciary rule. We also recognize that the DOL fiduciary rule as adopted and interpreted must be more appropriately tailored to discretionary investment advisers, who already are fiduciaries under the Investment Advisers Act of 1940.

The IAA has urged the SEC to preserve the existing overarching fiduciary principles under the Investment Advisers Act of 1940 in any rulemaking on a uniform fiduciary duty under Section 913 of the Dodd-Frank Act.

Impact of SEC Regulations on Small Business

For purposes of evaluating the economic impact of its rules, the SEC defines “small business” to include only investment advisory firms with less than $25 million in assets under management. Given that the basic threshold for SEC registration is $100 million, virtually no SEC-registered advisers are deemed to be “small” for cost-benefit purposes – even though more than 6,000 registered advisory firms employ 10 or fewer non-clerical employees. The IAA supports amending the definitions of “small business” and “small organization” so the SEC performs a realistic assessment of the impact of regulations on small advisers.

Dodd-Frank Act Reform and FSOC

The Dodd-Frank Act created the Financial Stability Oversight Council (FSOC) and gave it the power to designate systemically important financial institutions (SIFIs). We oppose the designation of any specific asset manager or fund as a SIFI and support efforts to bring much-needed transparency and due process to the FSOC’s work.

We support repeal of section 165(i) of the Dodd-Frank Act to the extent it requires the SEC to adopt rules requiring large funds and large advisers to conduct stress tests. Such a rulemaking is unnecessary given the nature of investment advisory firms and the SEC’s adoption of new rules designed to promote effective liquidity risk management by mutual funds.

SEC Oversight of Advisers

Effective oversight of the advisory profession is critical to investor protection. The IAA believes that the SEC – an experienced and accountable governmental regulator – is in the best position to provide that oversight, and should retain its primacy in investment adviser regulation. To that end, the agency should be given appropriate resources for effective oversight of advisory firms, provided that it uses those resources efficiently and to maximum effect.

The IAA strongly opposes subjecting advisers to a self-regulatory organization (SRO), such as FINRA, because it would impose a costly and unnecessary additional layer of regulation and bureaucracy on advisers without providing a commensurate benefit to investor protection.

Recent suggestions that third-party compliance examiners be engaged to augment the SEC’s adviser oversight program raise serious concerns about the standards, scope and frequency of any such reviews; confidentiality; the qualification process for third parties; the cost to advisers; and the ability of the SEC to oversee the third parties.

Overlapping Regulation by the SEC and CFTC

Investment advisers are subject to overlapping and often conflicting regulation by the SEC and CFTC that imposes costly compliance burdens which provide little benefit to investors. To address this duplicative and costly regulatory regime, the IAA recommends that Congress consider merging the SEC and the CFTC. The IAA also supports excluding from the CFTC’s definitions of commodity pool operator and commodity trading advisor any SEC-registered investment adviser to the extent it advises a registered investment company (or its subsidiary) that trades in financial commodity interests.

Tax Reform/Retirement Savings

The IAA supports tax reform to simplify the corporate tax system and the taxation of financial products. We oppose a financial transaction tax and any further increases to the dividend and capital gains rates. We also oppose efforts to force small businesses currently allowed to use cash accounting (which includes advisory firms) to switch to the accrual method. The IAA supports efforts to expand the options and incentives for voluntary retirement savings. We oppose imposition of new limits on incentives for Americans’ retirement savings.

Protection for Senior Citizens from Financial Abuse

The IAA supports S.223, the “Senior$afe Act,” legislation that would provide a safe harbor from civil liability for employees of investment advisers, banks, credit unions and broker-dealers who report suspected elder financial abuse to regulatory, crime enforcement, and adult protective authorities. Under the legislation, both the employee and the institution would be protected from liability resulting from the reporting of any instance of elder exploitation as long as the employee received proper training from the employer on identifying these instances.


The growing threat of cyber attacks has created a need for more cooperation and collaboration within the private sector and between the private and public sectors, and the IAA supported the recent enactment of legislation that facilitates cybersecurity information sharing, both among companies and between companies and law enforcement agencies. We also support establishment of a national data breach notification system that would make it easier for affected companies to comply with the law while ensuring that clients and customers are protected.


For additional information, please contact:

Karen Barr, President & CEO

Neil Simon, Vice President for Government Relations