More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- 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.
Secretary of the Treasury Henry Paulson is on a mission to reform the U.S. financial services regulatory structure to enhance the nation's global competitiveness.
He announced in late June the second part of his "capital markets competitiveness action plan." Part one, announced in May, seeks to strengthen financial reporting and create a more sustainable and transparent auditing profession. Part two, Paulson said in June, includes modernizing the regulatory system for all financial services providers, with an expected release of a blueprint of these steps by early next year. Paulson also wants to adopt best practices for asset managers and investors in hedge funds. The President's Working Group on Financial Markets will work with asset managers and investors to help these two groups define separate sets of best practices and systemic risks, Paulson said in announcing the initiative. As a way to boost investor education, Treasury also plans to lead President Bush's inter-agency public initiative to help all Americans better understand money and personal finance. "Any effort to improve the oversight of the financial services industry to protect investors must be coupled with empowering investors to understand their options and decisions," Paulson said. Treasury will also encourage international investment opportunities with recognition of comparable regulatory regimes. "Mutual recognition between countries with regulatory schemes comparable to the United States could increase international investment opportunities and enhance risk diversification while preserving investor protection," Paulson said. To this end, Paulson said Treasury supports the SEC's consideration of mutual recognition for foreign broker/dealers and foreign stock exchanges offering services to U.S. investors.
Treasury also plans to modernize Treasury's cash and debt management "through a broad series of public initiatives in the coming year," Paulson said, and will also work with U.S. regulators to move forward the new Basel II capital requirements, which he said would "reduce uncertainty and relieve burdens for both domestic and foreign banks."