One of the more anticipated and debated outgrowths of the Dodd-Frank Act was the designation of a self-regulatory organization responsible for investment advisers.  Yet, it has recently been reported that this issue is dead for the current Congressional session, although likely to come back again.

The only consensus thus far is that the SEC is ill-equipped to be the SRO.  The primary disagreement has focused on who should be the SRO for investment advisers: a new entity, FINRA or an enhanced SEC funded by user fees.

Regardless of the outcome of the Presidential election, this issue is likely to percolate once again in the next Congressional session.  The SEC is clearly not currently constituted to serve in the capacity as the SRO and, at the same time, there is a push for investment advisers to be subject to better oversight.

In the short-run, this means that investment advisers will still be subject to SEC examinations, which historically have resulted in very few examinations on a yearly basis relative to the number of investment advisers.  In the long-run, the debate will continue and it is likely that, at some point, there will be an SRO for investment advisers.  The most like SRO would, in my view, be an enhanced SEC as it already serves in an oversight role over investment advisers.  The question becomes whether any of us will be alive to see this happen.