More On Legal & Compliancefrom The Advisor's Professional Library
- Registration Requirements for Investment Advisor Representatives (IARs) When individuals launch an advisory firm, they must avoid marketing themselves or the firm as investment advisors before they are properly approved and registered. Otherwise, they are subject to severe penalties.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
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.