[Congressional Record Volume 140, Number 144 (Thursday, October 6, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 6, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
         S. 423, THE INVESTMENT ADVISERS ACT AMENDMENTS OF 1994

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                           HON. RICK BOUCHER

                              of virginia

                    in the house of representatives

                       Thursday, October 6, 1994

  Mr. BOUCHER. Mr. Speaker, more and more people are using financial 
planners to help them plan for their children's education and for their 
retirement years. Since 1981, the financial planning industry has grown 
dramatically from 5,100 to 22,000 registered investment advisers, and 
the assets they manage have increased from $450 billion in 1981 to more 
than $9 trillion today. Meanwhile, the Securities and Exchange 
Commission [SEC] has acknowledged that it does not have the resources 
to police the industry adequately.
  As the number of consumers who are using financial planners has 
increased, so too has the number of consumers who are losing their life 
savings through the activities of dishonest financial planners. While 
most financial planners are conscientious and law-abiding, recent 
studies indicate that consumers may be losing up to $1 billion annually 
as a result of misfeasance by some disreputable members of the 
industry. Clearly, some action is necessary.
  I first introduced legislation in 1990 designed to improve investment 
protections. Since that time, need for these protections has escalated. 
It is critical that this year we take affirmative action to remedy 
these problems. I want to thank Chairman Dingell, Chairman Markey, and 
Mr. Fields for their assistance and that of their staffs throughout 
this process of crafting legislation that does just that.
  This legislation represents a compromise between my bill, H.R. 578, 
passed unanimously by the House on May 4, 1993, and the Senate measure, 
S. 423, passed by that body on November 20, 1993. Credit for this 
compromise must go to House and Senate staff, who conducted extensive 
negotiations to reconcile the difference between the two bills. I thank 
them for their hard work.
  The goal of the legislation, to provide greater protections to 
consumers who entrust their financial decisionmaking--and often their 
life's saving--to investment advisers, remains. Some of the provisions 
of the House bill have been deleted; others have been modified. I have 
agreed to these changes because of the commitment of the Securities and 
Exchange Commission to address some of my concerns through rulemaking 
proceedings and in recognition of the fact that they were necessary to 
gain support of the full Senate.

  The bill before the House will provide additional resources for 
investment adviser supervision by the SEC to fund more frequent 
inspections of registered investment advisers. It gives the SEC 
authority to designate one or more self-regulatory organizations to 
conduct periodic examinations of investment advisers and requires that 
surveys be conducted to identify unregistered investment advisers and 
requires the SEC to correct any patterns of noncompliance.
  Within 1 year from the date of enactment, the SEC must examine 
conflicts of interest that may arise when an investment adviser is 
compensated on the basis of commissions or fees from sales. The SEC 
must then prescribe the necessary rules to require disclosure of 
material conflicts. The bill authorizes the SEC to develop a filing 
system designed to reduce paperwork for advisers and regulators and 
provides for a telephone or other electronic listing to provide 
investors with access to information concerning investment advisers.
  The SEC is directed to report on its proposals to revise the 
investment adviser registration form and to include an analysis of the 
methods by which these revisions will result in disclosure of 
background, compensation, services, practices, conflicts of interest, 
method for securing additional information, dispute remedies, and 
convictions of any crime punishable by imprisonment for 1 year or more 
within 10 years preceding the registration application filing. Finally, 
the bill authorizes the SEC to require that investment advisers obtain 
fidelity bonds against larceny and embezzlement.
  I hope my colleagues will join me in approving this measure. It will 
substantially improve the regulation of financial planners and 
investment advisers and will provide consumers with the types of 
protections they need to protect their assets.-

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