More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- 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.
Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, along with Rep. Steve Cohen (D-Tennessee) asked that the FINRA amendment--which was originally proposed by Rep. Spencer Baucus (R-Alabama)--be deleted. Baucus said during the House floor debate that he proposed the amendment post the Bernie Madoff ponzi scheme, and felt it was necessary because the SEC failed to properly exam Madoff's firm. Baucus did say, however, that he would agree to strike the Finra provision to the financial services bill at this time and explore other remedies. Frank responded that he agreed with Baucus's concerns, but was swayed by concerns expressed by the Texas Securities Administrator that the provision would delegate too much authority to FINRA.
Frank did acknowledge, however, that "there is a role for FINRA" and said Congress will continue to monitor the SEC and hold oversight hearings next year to determine "how best the SEC can [use] the resources of FINRA."
David Tittsworth, executive director of the Investment Adviser Association (IAA) in Washington, says that while he's "pleased that the amendment passed without any opposition, the big question now is whether the Senate can get a bill passed. We're going to be dealing with this [FINRA issue] well into 2010."