Wymer to Testify at Hearing on Regulating Investment Advisers

Newport Beach investment adviser Steven D. Wymer, who pleaded guilty to a $100-million fraud scheme, is slated to be the star witness today at a congressional hearing on toughening the regulation of such advisers.

Wymer, who last fall pleaded guilty to nine felony counts, is to testify before the finance subcommittee of the House Energy and Commerce Committee.

Wymer, who at one point managed $1.2 billion through his Institutional Treasury Management, was facing 30 felony charges when he pleaded guilty to nine counts carrying a penalty of up to 100 years in prison and a $200-million fine.

He has been cooperating with authorities in tracking down lost assets and is slated to be sentenced March 31 in Los Angeles.

Wymer was charged with promising clients big returns on supposedly safe investments that were really high-risk deals that eventually lost money.

His clients, which included the city of Orange, were mostly small cities and county agencies--primarily in California, Iowa and Colorado--seeking a safe investment for their excess cash.

Wymer’s testimony is intended to highlight the need for more stringent oversight of people and firms that offer investment advice for money.

The subcommittee chairman, Rep. Edward Markey (D-Mass.), and Rep. Rick Boucher (D-Va.) have introduced legislation to increase the Securities and Exchange Commission’s token oversight of the nation’s 17,000 investment advisers by hiring more inspectors and funding them through higher registration fees.

Right now, the financial planning industry that oversees $5 trillion in assets is so under-regulated that most firms will never be inspected for possible fraud.

SEC Chairman Richard Breeden told Congress last year that his tiny inspection staff of less than 50 can target only advisers managing at least $1 billion in assets about every three years. Smaller firms average an inspection about once every 30 years.

The Markey-Boucher bill would require financial advisers to supply customers with more details about fees and commissions. It also would change the one-time, lifetime $150 SEC registration fee to an annual one and increase it to between $300 and $7,000 annually, depending on the amount of assets under management. Only the very largest advisers, those managing more than $5 billion in assets, would pay the $7,000 fee.

Both the House and Senate passed similar bills last year but were unable to strike a compromise before the end of the congressional session.