AICPA Testifies on Draft Investment Advisers Bill

Article excerpt

The American Institute of CPAs emphasized the need for reform of the Investment Advisers Act of 1940 to focus on activities giving rise to investment adviser fraud and abuse--namely, holding clients' funds or securities for investment purposes or recommending and selling securities to the same client.

In testimony before the House Energy and Commerce Subcommittee on Telecommunications and Finance, Charles R. Kowal, chairman of the AICPA personal financial planning legislation and regulation subcommittee, generally applauded a discussion draft of a bill by Congressmen Edward J. Markey (D-Mass.) and Rick Boucher (D-Va.).

Titled the Investment Advisers Regulatory Enhancement and Disclosure Act of 1992, the bill would, among other things,

* Direct the Securities and Exchange Commission to conduct a public rulemaking that would result in a formal policy on what constitutes investment advice that is "solely incidental to" the practice of accountancy.

* Provide the SEC with additional funding targeted to investment adviser regulation and inspections.

* Establish a private right of action against advisers who engage in fraud.

An earlier version of the bill, introduced last year by Congressman Boucher as HR 2412, was not supported by the AICPA because it expanded the definition of investment adviser to include all those, including accountants, using the term "financial planner" or similar terms and because it narrowed the current exclusion available to accountants under the 1940 act. …


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