October 26, 1993
TO: INVESTMENT ADVISERS COMMITTEE NO. 30-93
RE: SENATE BANKING COMMITTEE APPROVES INVESTMENT ADVISERS BILL
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Last week, the Senate Banking Committee approved S. 423, the "Investment
Adviser Oversight Act of 1993." This bill is substantially similar to the
bill that was passed by the Senate last year. Congress did not pass
investment advisers legislation last year because of differences between the
Senate and House bills that could not be reconciled.
The key provisions of the bill include: (1) the imposition of an annual
fee on advisers, which will be based on assets under management and determined
pursuant to a schedule ranging from $300 to $7,000, and (2) a fidelity bonding
requirement for investment advisers with custody or investment discretion. A
new provision was added to the bill by the Senate Banking Committee that would
provide the SEC with discretionary authority to exempt investment advisers
from the fidelity bonding requirement "if (1) fidelity bonds are not readily
or reasonably available in the urban or rural areas in which such investment
advisers are located, or (b) the cost of obtaining a fidelity bond would have
a substantial adverse impact on such investment advisers’ competitive
positions."
As you may recall, the House passed an investment advisers bill in May
that is similar, but not identical, to the Senate bill. (See Memorandum to
Investment Adviser Members No. 25-93, dated May 6, 1993.) However, the House
bill includes a suitability requirement and transaction and periodic reporting
requirements that are troublesome. These issues will be addressed in
conference after the full Senate has approved S. 423.
A copy of the bill as approved by the Senate Banking Committee (with the
amendment to the fidelity bonding provision described above appended thereto)
is attached. We will keep you informed of developments on this matter.
Amy B.R. Lancellotta
Associate Counsel
Attachment