Turf battle erupts over two 'investment adviser' bills Brokers, CPAs, insurance agents ask exemptions.

February 19, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS -- A classic legislative turf battle brought stockbrokers, insurance agents and certified public accountants to a Senate committee yesterday to argue for regulation of "the other guy."

The fight pitted the three groups not only against one another as each asked to be exempted from state securities regulation, but also against independent financial planners, who called for "a level playing field" -- meaning regulation of everybody.

Under existing law, anyone who is an investment adviser must be regulated by the Maryland Securities Division and make certain disclosures to the state. But the question among many in the industry is exactly what constitutes an "investment adviser."

A bill before the Senate Judiciary Committee, sponsored by Sen. John A. Pica Jr., D-Baltimore, would carve out new exemptions in the law to allow many stockbrokers, life insurance agents and CPAs to avoid the authority of the securities commissioner.

The bill will take on added importance if another Senate bill, sponsored by Sen. Norman R. Stone Jr., D-Baltimore County, passes. Mr. Stone's bill would create a state investment adviser guaranty fund to compensate victims of securities fraud. It was inspired by Michael Hart, a former Baltimore County financial adviser convicted recently of bilking several clients out of about $1 million. The fund would be financed by assessments on everyone registered as an investment adviser.

Mr. Pica's bill would exempt most stockbrokers, who already are regulated by the securities commissioner, from the need to register as investment advisers.

Insurance brokers would be exempted if they simply noted their "chartered financial consultant" status -- an insurance industry educational designation -- but did not act as investment advisers.

The bill also would broaden the current exemptions for CPAs by allowing them to advise others "regarding the sale or purchase of securities."

That clause brought condemnation from the brokers and insurance agents, who argued that CPAs regulate themselves -- incompletely.

A state association of CPAs countered that Maryland, through its licensing board, already has full authority over accountants, as would the securities commissioner if a CPA committed securities fraud.

Independent financial planners -- the only ones who are currently regulated as investment advisers without exception -- argued that everybody else should be regulated, too.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.