More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- 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.
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%."