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NEW YORK (
TheStreet) -- Bernie Madoff must be chuckling in prison as he watches attempts to beef-up supervision of investment advisers go down in flames thanks to an all-out industry lobbying effort.
House Financial Services Committee chairman Spencer Bachus (R-Ala.) dropped efforts to push the Investment Adviser Oversight Act of 2012 to the House floor after he realized that it would never pass out of committee. Rep. Maxine Waters (D-Calif.) introduced a bill that would up fees and fines to pay for more examinations, but even that weak sauce is unlikely to live past the upcoming Congressional summer recess.
Advisers could not contain their glee at having dodged the oversight bullet, with industry leader Craig Hester of Hester Capital Management
telling InvestmentNews the death of the Bachus bill is "exactly what we've been asking for."
"Our lobbying efforts are starting to pay dividends," Hester gushed to the publication.
Bachus's bill -- which the congressman reintroduced, along with Rep. Carolyn McCarthy (D-N.Y.), in April -- would have transferred supervision of investment advisers to "one or more self-regulatory organizations," funded by membership fees.
Bachus said back in April that "the average SEC-registered investment adviser can expect to be examined less than once every 11 years," and that the "lack of oversight, particularly in the aftermath of the Madoff scandal, is unacceptable. Bad actors will naturally flow to the place where they are least likely to be examined."
Broker-dealers are regulated by the SEC and the Financial Industry Regulatory Authority, or FINRA, which is a self-regulatory body. Bachus's bill sought to expand FINRA's authority to cover registered investment advisers as well.
As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act -- signed into law by President Obama in July 2010 -- the SEC was required to conduct a study on the oversight of broker-dealers and investment advisers.
The SEC released its study in early 2011 and said that as of September 2010, there were over 11,000 investment advisers registered with the OCC, managing "than $38 trillion for more than 14 million clients." In addition, the OCC said that there were "more than 275,000 state-registered investment adviser representatives and more than 15,000 state-registered investment advisers."
The SEC recommended rulings based on Dodd-Frank that would apply a uniform standard to the supervision of investment advisers and broker-dealers, with a "harmonization of regulation" for the two groups.
The new bill introduced by Rep. Waters, along with former House Financial Services Committee chairman Barney Frank (D-Mass.) and Rep. Michael Capuano (D-Mass.) would "provide a dedicated funding source to the SEC to enable a robust investment adviser oversight program, consistent with the first recommendation made by SEC staff" in its January 2011 report. Waters added that "the SEC currently only examines approximately 8 percent of advisers annually, out of the approximately 11,000 advisers registered with the Commission."