More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Anti-Fraud Provisions of the Investment Advisers Act RIAs and IARs should view themselves as fiduciaries at all times, whether they meet the legal definition or not. Deviating from the fiduciary standard of full disclosure while courting clients may cause the advisor significant problems.
The NASD and NYSE have signed a letter of intent to form a new self-regulatory organization (SRO) that combines the regulatory arms of the NASD and NYSE, streamlining regulation into one entity with a unified set of rules for U.S. broker/dealers.
As reported earlier, The SEC, NASD and NYSE have been working in concert to create a single SRO, and take the two sets of broker/dealer regulatory rules and reduce them to a single set of regulations, reducing conflicts that have bedeviled the brokerage industry, and saving costs for broker/dealers. This next step lays out the groundwork for the new, to-be-named-later SRO.
Mary L. Schapiro, chairman and CEO of NASD, will be the CEO of the new SRO, which will have "regulatory oversight of securities firms, arbitration," as well as "professional training, testing and licensing of registered representatives, and of industry utilities like NASD's Alternative Display Facility, OTC Bulletin Board, and Trade Reporting Facility," according to a joint announcement from NASD and NYSE."
Richard G. Ketchum, CEO of NYSE Regulation will continue that role at NYSE, overseeing "market surveillance and listed company compliance at the New York Stock Exchange and NYSE Arca," and, in addition, will be non-executive chairman of the new SRO.
As promised by Schapiro in her comments on November 16 at the NASD's Fall Compliance Conference in Los Angeles, there will be representation for "firms of all sizes" on the board of the new entity: There will be a 23-member board of governors, including 11 public governors. Large firms, (500 or more registered persons), will be represented by three governors, as will small firms (150 or fewer registered persons); mid-sized firms, investment companies, independent dealer/insurance affiliated firms, and NYSE floor members are each guaranteed one governor.
Since the move to combine the two SROs into one entity is expected to save costs for the organizations themselves and for NASD member firms, it was announced that each NASD member firm would get a "one-time payment of $35,000 in recognition of anticipated cost savings that will result from the implementation of the plan." Operations are expected to begin in the second quarter of 2007, with "the current 2,400-person NASD organization and approximately 470 of NYSE Regulation's member regulation, arbitration, and related enforcement team."