WASHINGTON -- Of the many policy issues surrounding the investment advisor sector, few are more charged than the question of where regulatory authority should properly be housed.

Those clashing viewpoints were on full display here at the annual advocacy summit hosted by the Financial Services Institute, a two-day event that has compelled teams of advisors from all across the country to Capitol Hill in a lobbying blitz that will involve visits with the offices of more than 260 senators and representatives.

The issue stems from a report the Securities and Exchange Commission released in January offering recommendations for how best to proceed with implementing enhanced regulatory oversight of investment advisors, as the agency was directed to do under a provision of the Dodd-Frank financial reform bill signed into law the previous year.

The various proposals suggested include enhanced SEC examination of advisors funded through the collection of user fees, authorizing a self-regulatory organization to examine registered investment advisors, or authorize FINRA only to examine dual registrants.

For FSI, which is advocating strongly on the issue before lawmakers and policy makers, the best choice is clear.

"The current regulatory gap between how rigorously broker-dealers are examined and supervised versus how the relatively few resources [are] devoted to investment advisor examinations -- that gap must be closed. The status quo is not acceptable," said FSI President and CEO Dale Brown.

"We believe strongly that the best option, the best solution, for that is for Congress to authorize legislation that will allow the SEC to designate an SRO for investment advisors. We've also taken the next step in that in strongly endorsing that FINRA is the best candidate for that role."

Under that layered model, the SEC would have review authority over the designated SRO, be it FIRNA or another entity, to evaluate its oversight of retail investment advisors.

The group opposes the proposal to empower FINRA only to supervise dual registrant advisory firm on the grounds that it would preserve an uneven playing field by leaving pure-play investment advisors significantly under-regulated.

But that opinion is hardly without its detractors. While the FSI argues that regulatory reviews by the SEC and state regulators, each with jurisdiction over a subset advisors, are uneven, at best, the group representing state regulators warns that inserting an SRO into the mix would only serve to drive up compliance costs and further muddle the regulatory landscape, instead calling for expanded resources for the existing cops on the beat.

"Any increase in compliance cost, which we believe would be minimal unless an SRO is added to the mix, would be greatly outweighed by the direct benefit to investors," said Jack Herstein, the new president of the North American Securities Administrators Association.

Herstein represents a group of state regulators who have made their own case before members of Congress, most recently in testimony before a House committee, outlining what he described as the organization's "vigorous opposition to the creation of a self-regulatory organization for state-registered investment advisors," as well as deeply held concerns about empowering an SRO at the federal level.

That position puts NASAA and FSI in opposing camps in their stance regarding draft legislation that House Financial Services Committee Chairman Spencer Bachus (R-Ala.) has unveiled to empower the SEC to designate an SEO to oversee retail investment advisors.

"We believe that investment advisor regulation should continue to be the responsibility of both the state and the federal governments, and that these regulators must be adequately funded to carry out their responsibilities," Herstein said. "We see no benefit in constructing a new layer of bureaucracy with its high incumbent expenses. When it comes to regulation of investment advisors, government regulators bring to the table decades of experience unmatched by any entity in existence."