September 23, 1992
TO: BOARD OF GOVERNORS NO. 71-92
SEC RULES MEMBERS NO. 41-92
INVESTMENT ADVISER MEMBERS NO. 44-92
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 36-92
RE: HOUSE APPROVES INVESTMENT ADVISER BILL
__________________________________________________________
Last night, the House passed the "Investment Adviser
Regulatory Enhancement and Disclosure Act of 1992", which is
designed to improve the SEC’s oversight of the investment adviser
industry through the payment of annual fees by registered
investment advisers.
In general, the bill would (1) permit the SEC to impose an
annual fee on advisers, based on assets under management and
determined pursuant to a schedule ranging from $300 to $7,000;
(2) require the SEC to establish a schedule for adviser
inspections and permit the NASD to conduct adviser inspections of
its own members; (3) impose an express suitability standard under
the Investment Advisers Act; (4) authorize the SEC to require
investment advisers with custody or discretion to obtain fidelity
bonds; and (5) require registered advisers to provide prescribed
brochure disclosure and issue transaction and periodic reports to
clients. We are pleased to report that 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. Nevertheless, we continue to be
concerned about the suitability requirement and the transaction
and periodic reporting requirements.
As we previously informed you, the Senate passed a more
targeted bill last month, which does not include, among other
things, a suitability requirement or transaction and periodic
reporting requirements. (See Memorandum to Board of Governors No.
57-92, SEC Rules Members No. 36-92, Investment Adviser Members
No. 39-92, Investment Adviser Associate Members No. 31-92, dated
August 13, 1992.) In view of the fact that Congress is expected
to adjourn on October 5th, we anticipate conference committee
consideration of this legislation by then. We are hopeful that
the differences between the two bills, namely the suitability
requirement and the transaction and periodic reporting
requirement, will be satisfactorily resolved in conference. We
will keep you informed of developments in this matter.
Matthew P. Fink
President