Scrutiny of advisors to increase

July 26, 2012 | Last updated on July 26, 2012
2 min read

Canadian regulators are often accused of being one step behind financial fraudsters. But the quality of our provincial commissions may not be the problem.

In the U.S., regulators are underfunded and face an uphill battle in their attempt to stay on top of errant advisors; resources have depleted due to the recession and, chances are, Canadian officials are facing similar challenges.

To remedy this issue in America, U.S. Congresswoman Maxine Waters has introduced the Investment Adviser Examination Improvement Act. The bill would let the Securities and Exchange Commission collect higher user fees and increase the number of SEC advisor examinations done each year.

Read: Preparing for audits

In a statement, Waters said, “It’s absolutely essential we improve the oversight of investment advisers—the people managing the assets of millions of individual and institutional investors across the country.”

She added, “Since the crisis, we have witnessed an unfortunate deterioration in the public’s confidence in our financial markets. Though the vast majority of investment advisers operate with integrity, the SEC’s current examination levels need to be amplified in order to bolster the public’s trust in this marketplace.”

Read: Passing the buck: The cost of regulation

She says she introduced the act to provide a funding source dedicated to creating a tougher adviser oversight program.

Read: Regulators are underfunded

Currently, the SEC only examines 8% of advisers annually, out of the approximately 11,000 registered advisers. Under the legislation, the commission could increase inspections significantly and won’t need to establish a self-regulatory organization to achieve their goals.

Like many advisors, the SEC has seen its funds and earnings drop over the last decade. Waters says her bill will help the commission close its resources gap.