More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
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.