From the September 2008 issue of Investment Advisor • Subscribe!

SEC, DOL to Share Data

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  • Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients’ financial well-being may be jeopardized.  RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.   
  • Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isn’t 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 firm’s strategy is proprietary.

The SEC and Department of Labor (DOL) agreed July 29 to share information on retirement and investments in what they said was a bid to protect the $5.8 trillion in retirement assets of American workers, retirees, and their families held in employee benefit plans.

The memorandum of understanding (MOU) establishes a process for the department's Employee Benefits Security Administration and SEC staffs to share information and meet regularly to discuss matters of mutual interest, according to a release announcing the agreement. These include examination findings and trends, enforcement cases, and regulatory requirements that impact the missions of both agencies. The DOL has oversight over 401(k) and other retirement plans as well as plan participants, while the SEC oversees, among other areas, brokerages, investment advisors, and mutual funds.

"With a growing number of seniors focused on managing their own 401(k) plans, it's important to improve disclosure to give them the information they need and in a form they can use," SEC Chairman Christopher Cox said. "To accomplish this, the Department of Labor and the SEC are committed to coordinating closely on their behalf. This enhanced coordination will greatly benefit the millions of hardworking Americans who are saving and investing for their retirement as well as those who have already retired."

Both agencies will designate points of contact in their regional offices to facilitate communications among staff on enforcement and examination matters, the release states. "The agreement also will expedite the sharing of non-public information regarding investment advisors and other subjects of mutual interest between the two agencies. Additionally, DOL and SEC will cross-train staff under the agreement with the goal of enhancing each agency's understanding of the other's mission and investigative jurisdiction."

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