The Securities and Exchange Commission has recommended three options to Congress in its study on increasing investment advisor oversight, an issue being closely watched by the financial advisory industry since the Dodd-Frank legislation was passed into law last year.

The study, widely watched to see whether the agency would require a separate self regulatory organization for advisors, was required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and due this week.

Instead the SEC recommended that Congress take one of following approaches: charge “user fees” on SEC-registered investment advisors that could be used by the SEC to fund the investment advisor examination program; authorize one or more SROs to examine, under SEC supervision, all registered investment advisors; or authorize FINRA to examine dual registrants for compliance with the Advisors Act.

“As we have consistently stated, customers of investment advisors would benefit from the additional protection afforded by SRO oversight. Investors deserve the same level of protection regardless of whether they are dealing with a broker or investment advisor,” FINRA said in a statement.

The fee option appears to address funding issues at the SEC complicated by enhanced oversight and anticipation that the number of registered investment advisors will grow in the coming years.

“While the Commission’s resources and the number of OCIE staff may increase in the next several years, the number of OCIE staff is unlikely to keep pace with the growth of registered investment advisors,” the SEC said in the report. 

“As a result, the staff believes that the Commission likely will not have sufficient capacity in the near or long term to conduct effective examinations of registered investment advisors with adequate frequency.”

One SEC commissioner was not happy with the report even though she signed off on it.

“Although I voted to release the study, for the first time in my tenure as a Commissioner, I feel that it is necessary for me to write separately in order to clarify and emphasize certain facts, and ensure that Congress knows that the current resource problem is severe, that the problem will only be worse in the future, and that a solution is needed now,” wrote Elisse Walter in a separate statement.

Walter believes in the SRO route.

“OCIE has estimated that, in addition to its current enhancement efforts, it would need to double the current number of its investment advisor examiners (460) to increase the frequency of examinations to even 20 per cent,” she wrote. “It is an understatement to say that these increases would be difficult to achieve, even if the funding authorized under the Dodd-Frank Act were ultimately appropriated.”

In its study the SEC points out that over the past six years assets managed by registered investment advisors grew 58.9 per cent, from $24.1 trillion to $38.3 trillion.

The SEC is also required to submit by today a report required under Dodd-Frank on fiduciary standards. Also in the pipeline is the SEC’s final definition of a family office. It must adopt a rule defining an exempt family office before the sweeping reform goes into effect in July.