Investment Advisers Act Framework
The principles-based framework of the Investment Advisers Act of 1940 has consistently protected investors while fostering the growth of the fiduciary investment adviser profession, benefiting investors, capital markets, and the U.S. economy. The IAA strongly supports this adaptable approach, which allows regulatory requirements to be tailored to an investment adviser’s business. We actively engage with the SEC to ensure that its regulation of advisers adheres to this regulatory framework and does not introduce ineffective prescriptive, one-size-fits-all requirements.
Fiduciary Standard
At the core of the Advisers Act framework is the overarching principle that investment advisers are fiduciaries to their clients, a duty that applies to all aspects of their advisory relationships and methods of providing advice. The IAA has consistently advocated that all financial professionals offering investment advice about securities should adhere to fiduciary principles. We urge the SEC to enforce a strong investor-protective standard for all such professionals and to clearly distinguish between brokerage and advisory activities.
SEC Oversight of Advisers
Effective oversight of investment advisers is essential for maintaining an effectively regulated adviser industry and protecting investors. The IAA believes that the SEC, as an experienced and accountable governmental regulator, is best positioned to provide this oversight and should maintain its primary role in this area. The IAA supports efforts to ensure that the SEC has sufficient resources to oversee investment advisers effectively.
Impact of Regulation on Small Businesses
Small businesses are the foundation of the investment adviser community, with 92% of investment adviser firms employing 100 or fewer non-clerical staff and a median workforce of just eight. Policy should support the vital role these firms play in the financial ecosystem and enable their growth. The IAA has urged the SEC to better assess regulatory impacts on smaller advisers and we strongly back bipartisan efforts in Congress to reduce their regulatory burden.
Cumulative Impact of Regulation
The IAA encourages policymakers to take a holistic view of regulation. This includes performing cost-benefit analyses that account not only for individual proposals but also for their combined effects on investment advisers and their clients. Policymakers should also evaluate how their proposals interact with one another and with existing rules and streamline regulations to balance potential benefits with associated costs effectively.
Financial Exploitation of Seniors
The IAA supports legislative and regulatory measures that empower financial professionals to protect senior and vulnerable adult clients from financial exploitation. Specifically, the IAA advocates for the adoption of federal laws allowing financial professionals to delay certain transactions, disbursements, and redemptions when there is a reasonable suspicion of elder financial exploitation.
Tax Reform and Retirement Savings
Tax Reform
The IAA actively supports policies that promote a fair, competitive, and predictable tax system for advisers and their clients. Ensuring tax fairness strengthens the health of U.S. capital markets, fosters growth and innovation, and helps advisers continue serving investors effectively while supporting long-term economic stability. As Congress considers additional tax legislation, we encourage restoring and expanding the deductibility of advisory fees as an itemized deduction to promote access to fiduciary advice. Additionally, the IAA urges Congress to include investment adviser and financial services firms in the Section 199A pass-through deduction to support small advisers.
Retirement Savings
The IAA advocates for strengthening the U.S. retirement savings system by expanding access to employer-sponsored retirement plans and fiduciary advice. We strongly oppose proposals for mandatory “Rothification,” which would require after-tax contributions, and instead urge policymakers to focus on policies that encourage greater savings and long-term financial security. The IAA also supports giving 403(b) retirement plan participants – commonly employees in education, health care, and other tax-exempt organizations – the same investment opportunities and flexibility available in 401(k) and other retirement plans.
Ensuring Modernized Principles-Based Requirements
Pay to Play Rule
The IAA strongly supports the goal of preventing investment professionals from influencing business decisions through campaign contributions. However, the SEC’s current “pay-to-play” rule imposes unnecessary complexity, high costs, and significant burdens on advisers. The rule enforces harsh penalties without assessing the intent behind political contributions, treating even minor contributions as violations and chilling the ability of investment adviser personnel to engage in the political process. The IAA urges the SEC to shift away from a strict liability approach and adopt alternative methods that are better aligned with the rule’s objectives.
Modernizing Investor Communications (E-Delivery)
The IAA urges Congress to direct the SEC to make e-delivery the default method for investor communications, while preserving investors’ ability to opt for paper. With the vast majority of Americans already online and accustomed to digital services, e-delivery offers faster, safer, and more accessible communication than paper mail. It enhances engagement by giving investors timely, secure, and user-friendly access to critical information. Updating outdated SEC rules will reduce regulatory barriers, strengthen investor protections, and create a modern communications framework that benefits investors and advisers alike.
Anti-Money Laundering
The IAA strongly supports efforts to combat money laundering and terrorist financing. However, we believe these measures should be risk-based and targeted to address meaningful gaps in the current AML framework rather than duplicating existing protections. The Treasury Department recently announced that it will delay effectiveness of a new anti-money laundering (AML) rule for investment advisers – until January 2028 – and in the interim reconsider AML requirements for advisers. The IAA will continue to advocate for a balanced approach that effectively mitigates risks while minimizing unnecessary regulatory burdens, particularly on smaller investment advisers.
Strategy-Neutral and Uniform Federal Approach
Strategy-Neutral Policy
As fiduciaries, investment advisers must use their professional expertise and judgment to serve clients’ diverse financial objectives and act in their best interests. This requires policy and regulation to remain neutral – avoiding favoritism toward or against specific investment factors, considerations, strategies, or products – to preserve investor choice and prevent unintended adverse consequences. For example, policies should not explicitly or implicitly favor or disfavor passive or active management. Advisers should be able to consider – and investors should have access to – a full spectrum of investment strategies and products to meet their clients’ goals.
Expanding Access to the Private Markets While Strengthening the Public Markets
The IAA supports expanding access to the private markets, enabling greater portfolio diversification and investment opportunities while including appropriate guardrails to ensure investor protection. As one means to achieve this, the IAA supports legislation that recognizes clients of fiduciary investment advisers as accredited investors. Investment adviser clients are robustly protected by their advisers’ fiduciary duty to act in their best interests in selecting investments and managing their portfolios. At the same time, the IAA supports strengthening the public markets to ensure that all investors can continue to benefit from a thriving marketplace.
Data Privacy/Cybersecurity
The IAA supports the adoption of a comprehensive, nationwide framework for data privacy and cybersecurity to replace the current patchwork of state-specific requirements, reducing complexity and promoting consistency. Additionally, the IAA advocates for a single, national data breach notification regime that streamlines compliance for businesses while ensuring timely and effective communication to affected clients. We also encourage the SEC to collaborate with other federal regulators to ensure alignment and efficiency across the regulatory landscape through a cohesive, non-duplicative data privacy regulatory framework for investment advisers.
Federal Preemption of State Regulation of Investment Advisers
The IAA was instrumental in the passage of the 1996 National Securities Markets Improvement Act (NSMIA), which clearly divided regulatory authority between the SEC and the states. Under NSMIA, states are prohibited from regulating SEC-registered investment advisers and their representatives, except in very limited circumstances. The IAA strongly opposes efforts by states to expand their regulatory authority over SEC-registered advisers and their representatives, advocating for strict adherence to NSMIA’s provisions. This position was recently upheld by a federal district court in Missouri, affirming the importance of maintaining this division of authority.
Artificial Intelligence (AI)
The IAA urges policymakers to set clear, principles-based standards for AI use without favoring specific business models or tools. AI can improve compliance, portfolio management, and client communications, but regulation should preserve room for innovation while ensuring risks are managed. Advisers’ fiduciary duty already provides the framework for evaluating AI use, making duplicative or prescriptive mandates unnecessary.
Crypto Assets
Investors deserve confidence that crypto assets are safeguarded with protections equivalent to traditional assets, including segregation, insurance, and strong operational controls. The SEC’s custody framework should be modernized to ensure consistent protection across asset classes, so a crypto asset is safeguarded with the same care as a stock or other traditional asset class, without creating unworkable barriers for advisers.
For additional information, please contact:
Karen Barr, President & CEO
karen.barr@investmentadviser.org
William Nelson, Director of Public Policy, Associate General Counsel
william.nelson@investmentadviser.org
Gail Bernstein, General Counsel, Head of Public Policy
gail.bernstein@investmentadviser.org