A recent study funded by various industry groups concluded that the SEC’s examination program, properly funded, would be cheaper than creating a new SRO for investment advisers.  This study indicated that a new SRO would cost the investment adviser industry over $600 million a year, while a SEC program would cost over $240 million and a FINRA program would cost over $550 million. 

Additionally, the study indicated that investment advisers would prefer SEC regulation as opposed to FINRA regulation.  This study was done after the SEC report stating that it did not have the resources to comprehensively examine the investment adviser community as it was required to do so under the Dodd-Frank Act.  The SEC staff report recommended that there were three potential solutions to this issue:  

  1. More funding for the SEC’s examination program;
  2. Create a new SRO for investment advisers; or
  3. Expand FINRA’s jurisdiction to include investment advisers.

As expected, FINRA has criticized the study claiming that the group that conducted it never discussed the issues with either FINRA or the SEC.  In fact, FINRA has alleged that the industry groups are using the study as nothing more than a lobbying device. 

In sum, it will be interesting to see if Congress and the SEC address these issues.