Under Dodd-Frank, state picks up oversight
Even as it faces budget cuts like other state agencies, the Connecticut Department of Banking will see a significant increase in its regulatory oversight as it assumes jurisdiction for investment advisers who manage assets between $25 million and $100 million.
By one account, that will bring more than 100 new advisers under the jurisdiction of the Connecticut Department of Banking, with those companies currently reporting to the U.S. Securities and Exchange Commission.
Connecticut banking Commissioner Howard Pitkin, who is fresh off Gov. Dannel P. Malloy”™s endorsement to continue leading the Department of Banking, did not make himself available for an interview by press deadline. In a letter to the investment community, he said he has directed his staff to review the state”™s current statutory scheme, as well as myriad rule proposals advanced by the SEC to ensure the state is prepared for the transition when it arrives.
“It is my hope that, in light of the current economic climate, we will have the resources to handle the larger registrant pool,” Pitkin stated. “We pledge to the investment advisory community that we will strive to address their concerns efficiently and intelligently.”
Adding to their oversight
Under the Dodd”“Frank Wall Street Reform and Consumer Protection Act authored by former U.S. Sen. Chris Dodd and scheduled to go into effect in July, the SEC is surrendering to the states responsibility for policing investment advisers with less than $100 million in assets. To date, only advisers having less than $25 million in assets under management were subject to state registration requirements.
The Connecticut Department of Banking currently lists more than 500 investment advisers under its purview, about 220 of them in Fairfield County alone and more than 100 based outside the state.
Interestingly, less than 40 New York-based investment advisers are tracked by the Connecticut Department of Banking, despite the proximity of New York City and Westchester County where investment adviser companies proliferate.
The state lists more than 1,900 advisers currently registered with the SEC and doing business in Connecticut; of that number, some 400 come under the SEC”™s jurisdiction, with about 275 of them in Fairfield County.
Chief regulator is retiring
According to the trade publication Investment News citing information from the Connecticut Department of Banking, in the Dodd-Frank regulatory era Connecticut will initially add 135 more companies to the department”™s umbrella. The department will have to pick up the slack even as Malloy keeps its headcount flat at 120 people. Malloy is also recommending that the state cut the department”™s overall budget from $20.9 million to $20.2 million.
What”™s more, Connecticut”™s longtime chief regulator of securities is retiring even as the state ramps up its oversight of larger companies. In addition to his state duties, in 2004 Ralph Lambiase was president of the North American Securities Administrators Association Inc.
Led by Lambiase and in league with the SEC and other federal and state agencies, the Connecticut Department of Banking recovered a whopping $3.4 billion in funds for investors in 2010 (see related story on page 29), much of it for institutional investors who lost money after the market for auction-rate securities collapsed beginning in 2007 and 2008.