SEC Readying Proposal for Third-Party Adviser Exams

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By Rob Tricchinelli

Sept. 27 — The SEC is reviewing a measure for third parties to examine registered investment advisers, part of the agency's push to increase its IA oversight, Chairman Mary Jo White said Sept. 27.

Securities and Exchange Commission officials frequently say the investment-adviser examination program is underfunded and understaffed, and the agency has shifted examiners from broker-dealers to IAs to account for it (38 SLD, 2/26/16).

White has voiced support for an independent exam program for more than a year, and the three commissioners now have a full recommendation for a proposal from agency staff, she said at a Securities Industry and Financial Markets Association conference in Washington.

‘Can't Predict the Timing.'

White told reporters she “can't predict the timing” for a formal proposal, however.

The agency has repeatedly asked Congress to increase its budget for IA exams (27 SLD, 2/10/16). SEC examiners reach only about 10 percent of IAs in a given year, compared to nearly 50 percent of broker-dealers.

The SEC's Office of Compliance Inspections and Examinations moved roughly 75 exam staffers from broker-dealers to investment advisers earlier this year (48 SLD, 3/11/16).

Fiduciary Rule

The commissioners also have an outline of a fiduciary rule proposal, which would require broker-dealers to provide advice in their clients' best interest, but White said Sept. 27 not to expect a proposal “anytime soon.”

There are “different views among different commissioners” on the proposal, and White also cited its complexity and data-driven nature as reasons for its slow progress.

While IAs' recommendations must be in their clients' best interest, broker-dealers are required only to give suitable advice. The Labor Department has adopted a rule subjecting brokers to the best interest standard when giving retirement advice.

The SEC has had two vacant seats since the beginning of the year, which intensifies the remaining commissioners's influence over pending proposals..

“Clearly it’s optimal to have a full complement,” White told reporters. “There are some workload issues that are created when you don’t have a full complement. But if you look at all that we’ve accomplished this year with three, it’s a pretty impressive list.”

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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