More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Former SEC Commissioner Roel Campos, who is now part of President-elect Barack Obama's economic transition team, urged advisors to voice their concerns to the President-elect via letters, as he's one "who listens." The letters, Campos told attendees at the Investment Advisor/Moss Adams Advisor Summit in Washington, D.C., December 2, "will get read."
Campos, who's currently the partner-in-charge of Cooley, Godward, Kronish's Washington, D.C., office, also said he believes the banking regulators should be consolidated as there are "too many banking regulators." However, the new administration needs to "give a blessing" that there are two types of regulation--prudential regulation for banks which ensure safety and soundness and "keep panic from occurring," and a regulator for fraud deterrence and enforcement, which is the Securities and Exchange Commission. "It has been a big subject of debate whether there should be two types of regulation," Campos said. "It is necessary to keep these two systems."
The SEC, Campos said, must "do a better job" and be a stronger agency going forward. He acknowledged that the major players in the financial crisis have been "bank-centric." However, there is a possibility that the SEC could get "carved out" and lose, for instance, it's business conduct authority. This would not be wise, he said, because the SEC would thus lose its ability to prosecute fraud. "Fraud should still be the purview of the SEC" under any new regulatory restructuring, he said. There's talk of consolidating the CFTC and SEC as well, he said, which he argued would be a positive development, since it could be given oversight of hedge funds and credit default swaps, for instance. However, he said an expanded agency should be self funded through fees on the entities it regulates, allowing the SEC "to bring in experts that understand these complicated products."
As for regulation of registered investment advisors and broker/dealers, Campos said he would encourage a new SEC Chairman to impose "a common set of rules" for both, saying it was a "historical anomaly" that there are two sets of rules for RIAs and B/Ds. However, he acknowledged that's "easier said than done."