More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The debate about whether fair value, or mark-to-market accounting, is the best way for companies to value their assets ensued October 29 during the SEC's roundtable discussion on the topic.
"Fair value accounting is the best method to provide transparency" to investors, argued Vin Colman, a partner with PricewaterhouseCoopers, during the panel. Any changes to mark-to-market accounting, he said, "would cause investors to lose confidence." Scott Evans executive VP, asset management and CEO of two TIAA-CREF advisory units--like many others on the panel--agreed with Colman that "public markets are best served" by fair value accounting. While Evans, like others, conceded, however that the accounting method is "not perfect" and needs review, he said fair value is not one of the causes of the market crisis. Bill Isaac, former chairman of the Federal Deposit Insurance Corp. (FDIC), disagreed, stating that he believed fair value accounting has contributed to the market upheaval. "Mark to market can only be applied to a small portion of the balance sheet," Isaac said, only the assets, not the liabilities. This, he said, "creates a false impression" about a bank's asset status. "Banks will have a mismatch between assets and liabilities."
The SEC is attempting to get feedback on mark-to-market accounting because the Emergency Economic Stabilzation Act of Act 2008 (EESA) requires the Commission to conduct a study of "mark-to-market" accounting applicable to financial institutions, including depositary institutions, and to submit a report to Congress with the findings by January 2, 2009. The SEC will hold its next roundtable on the accounting method on November 21.
According to Reuters, Rep. Barney Frank (D-Massachusetts) chairman of the House Financial Services Committee, told business leaders in Boston that while he doesn't want to do away with mark-to-market accounting, he is considering "modifications," and he wants to make it easier for firms to use the accounting method during the financial crisis.