More On Legal & Compliancefrom The Advisor's Professional Library
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
The Securities and Exchange Commission published for public comment in October its Draft Strategic Plan outlining the Commission's strategic goals for fiscal years 2010 through 2015. The SEC says the draft plan surveys the forces shaping the SEC's environment and outlines over 70 initiatives designed to support its primary strategic goals. Comments on the proposal are due by November 16.
Besides strengthening the SEC's enforcement division, the strategic plan also sets out beefing up investment advisor and broker/dealer oversight. The Commission pointed to its consideration of rules designed to prevent political contributions from influencing the selection of investment advisers to the detriment of public pension plan clients, as well as rules that would provide additional safeguards to investors when an adviser has custody of client assets. The SEC says it will also "consider requiring those who provide investment advice to provide clients and prospective clients with clear, current, and more meaningful disclosure of their business practices, conflicts of interest, and backgrounds."