More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The Securities and Exchange Commission's inspector general, David Kotz, gave SEC Chairman Mary Schapiro and Robert Khuzami, director of the SEC's Division of Enforcement, a list of 21 improvements the enforcement division should make in the wake of the Commission's failure to detect and prevent the Bernie Madoff Ponzi scheme.
The enforcement division concurred with Kotz's recommendations--which focused on establishing formal guidance for evaluating tips and complaints as well as properly training staff--and Kotz told the enforcement division that he'd like to see, within the next 45 days, a "written corrective action plan" that includes responsible officials or points of contact, timelines for completing required actions, and milestone dates addressing how the division will address recommendations cited in Kotz's report.
A copy of Kotz's 21 recommendations can be viewed here.