Investment advisors could eventually have a national self-regulatory organization akin to the Financial Industry Regulatory Authority soon, if draft legislation introduced on Thursday from an Alabama Congressman becomes law.

But it will not come without a fight.

If passed in its current form, the legislation would allow industry organizations to apply to the SEC to become registered national investment advisor associations.

The first eight or so pages of the 28-page draft seem straightforward. Any organization seeking to oversee advisors would need the capacity to effectively oversee advisors and enforce compliance with its regulations.

Its rules need to appropriately fit investment advisors and their business practices. Advisors with $25 million in assets under management or more would be subject to the national organization’s oversight. Exemptions would apply to certain private funds and venture capital funds.

Rep. Spencer Bachus (R.-Ala.), who chairs the House Financial Services Committee, will hear from industry participants during a hearing next Tuesday to discuss the proposal. 

He is likely to hear strong objections from the Investment Adviser Association, based in Washington, D.C., for one. That group has opposed creating a self-regulatory organization for investment advisors on the grounds that proposals for such a group usually mimic the framework of the FINRA, which governs brokers.

“This bill, on its face, is based on the legislation that created FINRA’s predecessor,” David Tittsworth, executive director and executive director of the Investment Adviser Association said in a telephone interview. Tittsworth is one of seven or eight industry professionals who will testify at next week’s hearing, and will articulate several objections.

He acknowledged that the first three pages spells out which advisors are exempt from the potential organization’s oversight. That differs from FINRA’s framework. Almost everything else mirrors FINRA’s current model, however.

“We fundamentally oppose this approach,” Tittsworth said. “Our preference would be that the committee give serious consideration to user fees.”

The IAA strongly supports assessing user fees on the investment advisors and firms that are already under oversight by the SEC, which many argue is drastically underfunded in light of its responsibilities.

The IAA applauds the Financial Services Committee for at least convening a hearing to discuss the proposal, Tittsworth said. But he is less sure about whether the outcome, if based on the proposal, will be in favor of investment advisors.

“It would be nice if someone took a much closer look at FINRA and what its track record is and have a factual basis for making changes on Capitol Hill,” Tittsworth said. “But it is a very partisan environment.”