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Recommendations of SEC Asset Management Advisory Committee on Small Advisers

November 23, 2021

By Electronic Delivery

The Honorable Maxine Waters
House Financial Services Committee
Washington, DC 20515

The Honorable Patrick McHenry
Ranking Member
House Financial Services Committee
Washington, DC 20515


Re: SEC Asset Management Advisory Committee

Dear Chairwoman Waters and Ranking Member McHenry:

On behalf of the Investment Adviser Association (IAA), I am writing to bring your attention to the recent Report and Recommendations of the SEC’s Asset Management Advisory Committee (AMAC) regarding regulation of smaller advisers and funds. AMAC wrapped up its two-year term on November 3 and its recommendations call for:

  • tailored regulation of smaller advisers;
  • assessment of the cumulative impact of regulation on small businesses;
  • a more appropriate definition of small business

As detailed in the IAA’s 2021 Investment Adviser Industry Snapshot, the vast majority of the almost 14,000 SEC-registered advisers are small businesses. In fact, the “typical” adviser has eight employees. It is for this reason that, consistent with the AMAC recommendations, the SEC should revise its definition of small business for purposes of the cost-benefit analysis that it is required to perform, tailor its regulations more thoughtfully to smaller advisers with limited resources, and periodically assess the cumulative impact of regulations on smaller advisers.

In this regard, the IAA strongly supported the “Investment Adviser Regulatory Flexibility Improvement Act,” bi-partisan legislation passed by the House in 2018 as part of JOBS Act 3.0 (and introduced in the 116th Congress as H.R. 2436). This bill would require the SEC to analyze the impact of regulations on small businesses and consider alternative approaches that minimize the burden on smaller firms in accordance with the Regulatory Flexibility Act (RegFlex).

The SEC has been able to avoid application of RegFlex to advisory firms because the agency defines small businesses to include only investment advisers with less than $25 million in Regulatory Assets Under Management (AUM), despite the fact that the basic threshold for SEC registration is $100 million AUM. The Investment Adviser Regulatory Flexibility Improvement Act would require the SEC to create an alternative definition of small business for purposes of RegFlex that takes into account factors including the number of a firm’s employees.

We would be pleased to meet with you, or members of your staff, if you are interested in more information about the AMAC recommendations, the Investment Adviser Regulatory Flexibility Improvement Act, or the IAA’s views on how to address the regulatory burdens on smaller advisers.

Thank you for consideration of our views.

Karen L. Barr
President & CEO

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