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.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
House Financial Services Committee Chairman Barney Frank (D-Massachusetts) said July 10 that there's a consensus building that more financial services regulation is needed, and that Congress "should be moving to empower the Federal Reserve Board to have regulatory authority over a wide range of financial institutions."
The recent Memorandum of Understanding (MOU) between the SEC and the Fed is a step toward doing just that. The MOU has set in motion Treasury Secretary Henry Paulson's Blueprint for financial services reform. In the MOU, the SEC and the Fed agreed to "deepen" the amount of information they share about anti-money laundering, bank brokerage activities under the Gramm-Leach-Bliley Act, clearance and settlement in the banking and securities industries, and the regulation of transfer agents.
The MOU "builds on and formalizes the long-standing cooperative arrangements between the SEC and the Board, as well as the more recent cooperation on matters including banking and investment banking capital and liquidity following the Board's emergency opening of credit facilities to primary dealers," according to the SEC.
Both Paulson and Federal Reserve Board Chairman Ben Bernanke, who testified along with Paulson, asked lawmakers to give the Federal Reserve the powers it needs to collect information from financial institutions like commercial banks, hedge funds, investment banks, and other financial institutions.
Frank asked Paulson and Bernanke if they needed an immediate action by Congress to get the ball rolling, or whether it could wait until early next year. Both Paulson and Bernanke agreed that how the Fed should take on the role of a "macro-stability" regulator would take some time to think through.
But one priority Congress should have for this year, Paulson said, is passing the Government Sponsored Enterprises (GSE) reform legislation, which would create a new regulator for Fannie Mae and Freddie Mac.