More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
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."