As we reported in previous editions of our Investment Management Newsletter, various persons have proposed that a user fee be imposed on SEC registered investment advisers in order to fund a more extensive examination program by the SEC.
The primary concern of the proponents of the imposition of a user fee is that registrants are not examined often enough by the SEC, due to SEC budget constraints. The SEC’s Office of Investor Advocate (the “Office”), a new office created under the Dodd-Frank Act, recently proposed that Congress provide the SEC authority to collect such fees from registrants. As part of its proposal, the Office stated each investment adviser could and should be examined at least every three years. In addition, the implementation of a user fee would permit the SEC the flexibility to examine “high-risk” registrants even more frequently. State securities regulators generally have the authority under their state securities laws to bill a registered investment adviser for the time and expenses of state examiners while conducting an examination of a registrant. The user fee being proposed upon SEC registrants could either impose a fee (like the states) subsequent to an examination or increase registration fees paid annually to cover the SEC’s examination program expenses.
This recent call for implementation of a user fee is one of several such calls over the last several years. Time will tell whether this recent call has traction in Congress.