Report Documents State-Federal Effort that Shifted More Investment Advisers to State Oversight

May 20

Texas Securities Commissioner John Morgan today announced a report documenting the successful completion of the transfer of mid-sized investment advisers (IAs) from federal to oversight by state regulators.

In Texas, 243 advisers shifted to regulation by the Texas State Securities Board (TSSB) in 2011 and 2012. Nationally, approximately 2,100 advisers switched to state regulation.

The report, The IA Switch: A Successful Collaboration to Enhance Investor Protection, was prepared by the North American Securities Administrators Association (NASAA), of which the Texas State Securities Board is a member.

The switch stemmed from Section 410 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which gave states the authority to regulate investment advisers with $100 million or less in assets under management. Before Dodd-Frank, state regulated IAs with a maximum of $25 million in assets under management.

"The IA switch is a good example of the collaboration that often occurs between state and federal regulators, to the benefit of investors,"Morgan said.

State regulators are not only closer in proximity to mid-sized investment advisers but better understand the advisers' business practices and the needs and concerns of their clients. States also can more effectively regulate advisers through more frequent examinations.

In addition to assuming regulatory responsibility for more mid-sized advisers, Morgan said, the State Securities Board has taken steps to ensure that all advisers in Texas are examined more frequently. The TSSB currently regulates approximately 1,600 registered investment advisers.