August 6, 1992
TO: BOARD OF GOVERNORS NO. 53-92
INVESTMENT ADVISERS COMMITTEE NO. 31-92
RE: HOUSE ENERGY AND COMMERCE COMMITTEE APPROVES
INVESTMENT ADVISER BILL
__________________________________________________________
Early this week the House Energy and Commerce Committee
approved the "Investment Adviser Regulatory Enhancement and
Disclosure Act of 1992." Among other things, the bill would
provide the SEC with additional resources to improve its
oversight of the investment advisory industry through the payment
of an annual fee by registered investment advisers. The bill
does not contain certain controversial provisions, including that
which was of most concern to the Institute -- the establishment
of an express private right of action against advisers who engage
in certain fraudulent transactions.
In general, the bill permits the SEC to impose an annual
fee on advisers. The fee is based on assets under management
(determined pursuant to a schedule ranging from $300 to $7,000).
In addition, the bill contains a revised suitability standard
(about which the Institute remains concerned), requires
investment advisers with custody and discretion to obtain a
fidelity bond, and requires additional disclosures regarding
conflicts of interest. The bill also contains a provision that
would permit the National Association of Securities Dealers, Inc.
to conduct adviser inspections of its own members. The bill does
not contain the provision which would have required the SEC to
issue rules relating to the broker-dealer exemption from the
definition of "investment adviser."
There are ongoing discussions on certain provisions of the
bill, particularly the specific language of the suitability
requirement and the transaction and periodic reporting
requirements. We are hopeful that these issues will be resolved
as the bill moves forward.
- 2 -
The Senate Banking Committee has also reported an
investment adviser bill, which is awaiting consideration by the
full Senate. There is a good possibility the investment adviser
legislation will be enacted into law this year.
We will keep you informed of developments.
Matthew P. Fink
President
Attachment