Tittsworth has spent most of his 30-plus-year career in the public sector, where he has served in all three branches of government. The IAA is a non-profit organization for federally registered investment advisory firms. He spoke with Elizabeth Wine about ways to police the advisory business.

1.You believe brokers should have the same fiduciary duties as registered investment advisors. Why?
Our greatest principle is the idea that we don't want the fiduciary duty under the Investment Advisers Act weakened or watered down. As a second principle we support extending the Advisers Act fiduciary duty to others who provide investment advice, such as discount brokers who give limited advice or insurance agents who sell financial products. If you're providing investment advice, you should have the same fiduciary duty as an investment advisor.

Our third principle is that we think it's a bad idea to go down the road of establishing different standards for different types of clients. The House [financial reform] bill is complex. The bill's fiduciary duty will apply at the point where a broker-dealer is providing personalized advice to retail customers. But what is personalized advice? What is a retail customer? All I'm saying is there are a lot of questions about what the House bill really means. It would take a lot of sorting through by the SEC.

2. So what should be done about it?
We support the discussion draft Sen. Christopher Dodd [D-Conn.] put out [in November]. It removed the broker-dealer exclusion [from having fiduciary duty] under the Investment Advisers Act. It's clear that the brokerage industry and the insurance industry-insurance agents selling variable annuities and other types of financial products to people-think a fiduciary duty will be the end of the world as we know it.

A lot of the convoluted provisions in this bill are because brokers and the insurance industry are trying to limit the application of the fiduciary duty to their activities. I don't expect them to quit fighting that in the Senate. The Dodd draft is a better approach. But it would be Pollyannaish to believe that will survive all the lobbying from other interest parties.

3. Why do you oppose the proposal of a self-regulating organization for the industry?
We oppose self-regulation or the imposition of an SRO on investment advisors because it involves an inherent conflict of interest. An SRO by definition is funded by the industry that it's supposed to regulate. We support having a single regulator with the mission of the SEC to protect investors, maintain fair and orderly and efficient markets and facilitate capital formation.

4. There is broad support in Congress for boosting the SEC's budget so it has enough inspectors to police effectively. What's the debate over how to fund it?
The House bill indicates there's a desire to give the SEC additional resources. In the Dodd draft there's a mechanism we'd favor over these other approaches called self-funding. The SEC collects fees of securities transactions, but now they go into the general treasury. But if they could have access to those funds (in 2010 it is estimated to be $1.5 billion) that would be a 50% increase from the SEC's current appropriation from Congress of $1 billion. That would be the best way to ensure stable and long term funding.

5. How should the SEC improve its inspection program for advisors?
The Inspector-General put out reports on [convicted Ponzi scheme mastermind Bernard] Madoff this year that highlighted deficiencies in the way the SEC operates. Different divisions in the SEC are not talking to each other. We suggested to the SEC that advisors should provide [it] with periodic data so [the SEC ] can look for outlier firms and... go out and inspect firms that may have outside performance or unusual trading patterns.