More On Legal & Compliancefrom The Advisor's Professional Library
- Regulatory Oversight of Investment Advisors Although the regulatory environment is in a state of flux, it is imperative that RIAs adhere to their compliance obligations. To ensure compliance, RIAs and IARs must fully understand what those obligations are.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
In response to the scandal over favors given to some Fidelity mutual fund equity traders and supervisors by certain broker/dealers from 2002 to 2004, Fidelity chairman Ned Johnson apologized to shareholders, customers, clients and employees, and said Dec. 21 that the company would pay $42 million plus interest to its mutual funds "for this misbehavior and the company's failure to stop it"--a penalty recommended by its independent trustees, which included as its head at the time the new Defense Secretary, Robert Gates.
The Trustees' report on the scandal found that "... inadequate supervision and other shortcomings exposed the Funds to the potential risks of adverse publicity, loss of credibility with their principal regulators, and loss of Fund shareholders."
Earlier this month, one of those brokerage firms implicated in the scandal--Jefferies Group--agreed to pay a fine of nearly $10 million to NASD and the SEC to settle charges that it illegally spent $2 million in entertainment and other gifts, like expensive golf trips and the use of private jets, on the Fidelity fund traders. Jefferies also agreed to hire an independent consultant to review its compliance procedures.
The Trustees' report is available at
http://personal.fidelity.com/global/content/independent-report.shtml.cvsr?refhp=pr&ut=A47; Johnson's open letter is at