More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt 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 firms strategy is proprietary.
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%."