More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
While members of Congress praised SEC Chairman Mary Schapiro July 14 for acting quickly to institute changes at the beleaguered agency, lawmakers said more work needs to be done at the SEC to protect investors.
The SEC "must continue to take bold and assertive action as it moves forward to bring enforcement actions against wrongdoers and to rewrite the rules governing the industry to better protect investors," Paul Kanjorski (D-Pennsylvania), chairman of the House Financial Services Capital Markets Subcommittee, said in his opening remarks at a July 14 hearing held to assess the current state of the SEC and its agenda.
Schapiro told members of the subcommittee that SEC staff has moved with a sense of urgency to institute changes designed to protect investors and promote investor confidence. She listed the changes the SEC is now vigorously engaged in. They include:
? working to fill regulatory gaps exposed by the economic crisis;
? seeking to strengthen standards governing broker/dealers and investment advisors;
? enhancing disclosure provided to investors;
? streamlining enforcement procedures and focusing on cases that will have the greatest impact;
? revamping the system for handling the approximately one million tips and complaints the Commission receives annually;
? improving the SEC's risk assessment capabilities;
? bolstering internal training; and
? bringing on new leadership and new skill sets.
Cleaning House; Maybe a Budget Hike?
In less than six months, Kanjorski noted, Schapiro has replaced nearly all of the agency's senior staff.
Kanjorski said he's developing a bill on financial services reform using the "ambitious set of 42 legislative proposals" that Schapiro recently sent to Congress, as well as ideas from the SEC's inspector general and the Obama Administration.
Kanjorski noted that one important proposal stands out: To put in place new standards that reward whistleblowers when their tips lead to catching fraudsters.
When asked whether an increased budget would prompt the SEC to not further explore the option of a self-regulatory organization for advisors, Schapiro said that "even though our budget is growing, I am game to explore the SRO because I think it will allow us to do a better job." She said the key to a successful SRO would be strict oversight by the SEC.