From the March 2009 issue of Investment Advisor • Subscribe!

When It Pays to Fight City Hall

Sidebar to the The Playing Field "Reform Is On The Way"

More On Legal & Compliance

from The Advisor's Professional Library
  • Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors.  When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
  • RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients’ privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.

New SEC Chairman Mary Schapiro promises better enforcement from the Commission, but the securities law firm Sutherland Asbill & Brennan's annual analysis of litigated disciplinary proceedings brought by the SEC and FINRA against broker/dealers and registered representatives shows that it sometimes pays for B/Ds and reps to litigate against the regulators.

Of the 86 charges that were litigated by the SEC and FINRA during the year ended September 30, 2008 (the SEC's fiscal year), firms and representatives succeeded in getting charges dismissed 16% of the time, Sutherland's study found. SEC respondents had slightly more success (approximately 19%--5 of 26) than FINRA respondents (15%--9 of 60). "The success that FINRA respondents had marked an improvement compared with prior years going back to January 2000," the study said. "Historically, the average dismissal rate for FINRA charges has hovered around 11%."

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