May 6, 1993
TO: BOARD OF GOVERNORS NO. 43-93
SEC RULES MEMBERS NO. 42-93
INVESTMENT ADVISER MEMBERS NO. 25-93
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 16-93
RE: HOUSE APPROVES INVESTMENT ADVISERS BILL
__________________________________________________________
On May 4, the House of Representatives passed by voice vote
H.R. 578, the "Investment Adviser Regulatory Enhancement and
Disclosure Act of 1993." The legislation is similar to the bill
that the House passed last year. Congress did not pass advisers
legislation last year because of differences between the House
and Senate bills that could not be reconciled.
The key provisions of the bill would: (1) authorize the SEC
to impose an annual fee on investment advisers; (2) require the
SEC to establish a schedule for investment adviser inspections;
(3) impose an express suitability requirement under the
Investment Advisers Act; (4) require registered investment
advisers to provide prescribed brochure disclosure and issue
transaction and periodic reports to clients; (5) authorize the
SEC to require investment advisers with custody of client funds
or securities or with discretionary authority over client assets
to obtain fidelity bonds, and (6) facilitate one-stop filing of
reports and records.
The legislation includes two additional provisions that
were not included in last year's bill. First, the one-stop
filing provision has been amended to require the entity
designated by the SEC to be responsible for one-stop filing to
establish and maintain a toll-free number to receive inquiries
regarding disciplinary and other information involving investment
advisers. Second, the SEC is directed to submit a report to
Congress (1) analyzing the risks to investors when an investment
adviser is made sole recipient of communications from the
custodian of client securities and funds and when an investment
adviser or affiliate thereof serves as the custodian and (2)
making any recommendations it believes are necessary to eliminate
or reduce those risks.
There has not been any activity in the Senate on S. 423,
the "Investment Adviser Oversight Act of 1993," which is a more
narrowly focused bill than the House bill in that it principally
would require investment advisers to pay an annual fee and would
impose a fidelity bonding requirement on certain advisers.
However, S. 423 could move quickly since it is currently
anticipated that the Senate will pass the same bill as last year.
We would then expect Conference consideration to reconcile the
differences between the House and Senate bills.
We will keep you informed of developments on this matter.
Matthew P. Fink
President