IAA Statement: SEC Exams
June 26, 2023
IAA VP of Communications & Marketing Janay Rickwalder.
The IAA strongly believes the best way to enhance oversight of investment advisers is to ensure that the Commission has adequate resources, and that the agency continues to improve its examination program. To that end, we have long advocated for adequate Congressional funding for the SEC’s examination function.
The Commission has implemented a more risk-focused examination program to enhance compliance at advisory firms, inform the financial industry about potentially risky practices and methods to effectively address them, and provide information for Commission enforcement investigations, where appropriate.
While we have a long history of supporting efforts to increase the frequency of investment adviser examinations, the coverage statistic is only part of the equation. Examinations must be effective, substantive, risk-targeted, and conducted by examiners who understand both relevant regulations and the nature of the businesses being examined. The quality of examinations is as important as the number.
We urge the Commission to allocate adequate resources to the Exams Division to increase adviser oversight. We will continue to support sufficient funding for this purpose. The IAA is committed to supporting the Commission’s efforts to obtain adequate funding through the Congressional appropriations process. We continue to encourage the Commission to consider ways in which it can increase the frequency and quality of investment adviser examinations under its current allocation of resources and any future allocated resources.
In the absence of adequate Congressional funding for the SEC’s examination program, we have supported the assessment of an appropriate user fee on advisers dedicated to increased examinations, subject to several controls. To ensure that user fees would keep the exam function within the Commission and be used solely to bolster the examination program for investment advisers, any legislation to authorize user fees should include provisions that, among other controls:
- specifically preclude any investment adviser SRO if such fees are imposed.
- clarify that such user fees will be dedicated to an increased level of investment adviser examinations (instead of simply being used as substitute funding for the existing level of examinations)
- set forth specific Commission reporting requirements and review of any such user fees by Congress and the public.
About the Investment Adviser Association
The Investment Adviser Association (IAA) is the leading trade association representing the interests of fiduciary investment adviser firms. The IAA’s member firms collectively manage more than $35 trillion in assets for a wide variety of institutional and individual investors. In addition to serving as the voice of the advisory profession on Capitol Hill and before the SEC, DOL, CFTC and other U.S. and international regulators, the IAA provides extensive practical and educational services to its membership. For more information, visit investmentadviser.org or follow us on LinkedIn, Twitter and YouTube.