With the federal SEC moving at a slug's pace to examine investment advisers — think bad, bad Bernie Madoff — Texas and other states have been given the green light to begin scrutinizing big firms of up to $100 million in assets next year.
That's good news for investors, since the Securities and Exchange Commission takes about a decade to examine all the investment advisers it currently regulates and has left thousands uninspected, experts said.
Both state regulators and investment advisers say the SEC has been saddled with too much for too long. On the flip side, Texas and other states will have to pick up the burden of about 4,100 new investment firms, including hundreds more in Texas.
Currently, states examine investment advisers with less than $25 million of assets under management. These days, that's a small shop compared to the mega-firms with billions of dollars under management. Beginning next year, the federal Dodd-Frank Act slides firms with up to $100 million in assets under state jurisdiction. In Texas, that means doubling the current 1,200 firms overseen by the Texas State Securities Board to roughly 2,400.
Texas Securities Commissioner Denise Voigt Crawford pushed for the wider jurisdiction while president of the North American Securities Administrators Association. Since 1996, when Congress drew the $25 million line in the sand between states and the feds, the SEC "proceeded not to regulate," Crawford said.
"The SEC, by its own admission, has said that over 3,000 of these investment advisers have never been examined even once," she said.
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