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Investment Adviser Act proposes increased fees.

A bill developed with the Securities and Exchange Commission that seeks to improve supervision of investment advisers was introduced by Senator Christopher Dodd (D-Conn.), chairman of the Securities Subcommittee of the Senate Banking Committee.

The Investment Adviser Oversight Act of 1992 (S2266) contemplates funding a greater number of inspections of investment advisers by substantially increasing the fees they pay to the SEC and using the added revenue to hire additional SEC examiners.

The legislation also amends the Investment Advisers Act of 1940 by expressly prohibiting advisers from making unsuitable recommendations to clients and gives the SEC authority to require advisers with custody of client funds or securities to be bonded against larceny and embezzlement. In addition, the SEC would be authorized to develop with the states a central registry for investment advisers.

"In my view, and in the view of the SEC, by far the most important means of policing this industry is to place more cops on the beat," Dodd said. He warned of investors "taken in by slick sales tactics or high pressure solicitations" and of the elderly "taken in by con men ... receiving a commission on the sale of the product" with no opportunity to recoup their losses.

A companion bill is expected to be introduced in the House.
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Publication:Journal of Accountancy
Date:May 1, 1992
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