Advisors heavily oppose the establishment of an SRO, according to a survey of Massachusetts state-registered investment advisors by the Massachusetts Securities Division,
"Advisers’ responses were very consistent in their opposition to the establishment of an SRO for investment advisers," the organization said.
The survey, which polled over 300 Massachusetts advisors, examined how advisors felt about the the Investment Adviser Oversight Act of 2012, which was proposed to the Financial Services Committee in April. If passed, the legislation would allow the SEC to establish a self-regulatory organization to oversee advisors, therefore requiring state and SEC-registered advisers to become a member of the new SRO. The membership could incur an estimated membership fee of $10,000, much higher than the $300 annual fee advisers pay today.
Ninety-eight percent of advisers expressed concern that the estimated SRO membership fees would have a financial impact on their ability to run their firm. Of the 98%, 69% said the impact would be categorized as “severe.”
Because of the possible SRO membership fee, 81% indicated they would be less likely to hire new staff and even retain their current staff. Fifty-five percent of advisers that had two or more employees said they would be less likely to keep one or more of them on staff, contributing to job loss in Massachusetts. Eight percent of advisors reported they would be more likely to hire new employees to fulfill new regulatory requirements, but would have to shift resources away from client services in order to do so.
Forty-one percent of advisors added they would more than likely be forced out of business and have to join larger firms if the proposed bill passes.
At the end of the survey, participants were given the opportunity to add personal (and anonymous) comments. “If the objective is to eliminate smaller firms…it would work I'm sure,” one anonymous participant said.
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