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.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
This news originally appeared on WealthManagerWeb on 10/27/09
Securities and Exchange Commission Chairman Mary L. Schapiro spoke of the need to "restore investor confidence by focusing on the needs of investors," as the Securuties Industry and Financial Markets Association (SIFMA), opened its annual meeting on Oct. 27 in New York.
In her speech, Schapiro outlined the progress that the Commission has made so far in the past nine months of her tenure, as it continues to "refocus...on core investor protections." This includes analyzing "the risks and trends of new products pitched to investors." Schapiro highlighted a new area of the SEC, a department of "Risk Strategy and Financial Innovation."
In addition to initiatives in corporate and market-structure transparency, scrutiny of "complex fee arrangements" and "emerging risks," the Chairman made it clear that overly-complex, high fee products, especially those aimed at the retirement-bound investor, will not be tolerated. In particular, target date funds and life settlements are under the SEC's magnifying glass.
In addition, Schapiro says she supports the recommendation in the Obama admistration's Investor Protection Act (IPA) for a "fiduciary standard for all financial services professionals who provide investment advice about securities," adding that, "a high standard should apply. Investors simply want their advisors to put [investor's] interests before their own." The Chairman went on to tell the SIFMA audience that the fiduciary standard that becomes law should be a strong one, and not be "a watered down...commercial standard."
The SEC has fairly wide lattitude in the IPA, as drafted, to ensure that the fiduciary standard of conduct that is ultimately put in place for all providers of advice is an authentic fiduciary duty, which has been in place for decades for investment advisors and their clients and is based on centuries of law.
The fiduciary standard includes the core principles of putting investor's interests first, prudence, making robust, meaningful disclosures of all material conflicts and management of all conflicts in the client's favor.
The IPA bill is in mark-up this week in the House Financial Services Committee.
Comments? E-mail Wealth Manager Editor in Chief Kate McBride at email@example.com. McBride is a member of The Committee for the Fiduciary Standard.