More On Legal & Compliancefrom The Advisor's Professional Library
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
While the chief compliance officer (CCO) should of necessity be the main player in the compliance review process, whenever possible I strongly recommend that at least one other firm officer be substantively involved in the review. It is imperative for senior management (an individual other than the CCO) to have a working understanding of the compliance processes and exam-related issues in the event of the CCO's absence or resignation or termination. The SEC is not likely to postpone an exam in the event of a CCO's extended absence or resignation/termination. Ultimately, senior management is responsible, and must be sufficiently prepared to step in if necessary. For these reasons, I strongly encourage senior management's participation in the compliance review process.