More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
If what SEC Chairman Christopher Cox and NASD Chairman and CEO Mary Schapiro each spoke of at the Securities Industry and Financial Markets Association (SIFMA) conference in Boca Raton on November 9 and 10 comes to pass, a harmonious set of rules from the NASD and NYSE, and a unified self regulatory organization (SRO) for broker/dealers and exchanges may be well on its way. This must be music to the ears of broker/dealers who have seen the amount of time and money spent on compliance skyrocket since 2003, and been frustrated dealing with multiple--and sometimes conflicting--sets of regulations.
"All of that hard work has essentially been completed--and the resulting recommendations are even now being reviewed internally at the NYSE and NASD. As a result, I expect that we will soon see proposed rule changes filed with the SEC for the purpose of harmonizing the NYSE and NASD rules," Chairman Cox said in a speech to the newly-launched SIFMA, which combined the Securities Industry Association and the Bond Market Associations into one industry association/lobbying group.
Emphasizing the need to balance the need to protect the investing public while not crushing innovation in the securities markets, Chairman Schapiro brought up in her remarks "the alternative of prudential regulation," but added that "invasive regulation" could again become the reality for the industry if necessary. But she said that a lot of the rules review had been accomplished already and that "we have met with the industry and the New York Stock Exchange to harmonize the rulebooks of both self-regulatory organizations and we will begin to propose harmonizing rule amendments, on a rolling basis, beginning with our next Board meeting in December.
Chairman Cox said it is time to bring the rules of the two (SROs) into sync with the way that exchanges and broker/dealers operate now, with major exchanges becoming both for-profit and trans-Atlantic, and balance that with the needs of the investing public He cited one of the catalysts for revamping the SROs is "the needless cost and inefficiency of multiple SROs that result from multiple rulebooks, duplicative inspection regimes, and redundant staff. It is investors who pay those extra costs in the form of both money and lost efficiency."
The first proposed unified rules are expected to be sent to the SEC for approval by the first quarter of 2007, according to Scott Peterson, a spokesperson for NYSE Regulation.