From the February 2010 issue of Investment Advisor • Subscribe!

GroupThink

More On Legal & Compliance

from The Advisor's Professional Library
  • 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.
  • Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs’ advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.   

? At the 2010 Investment Management Consultants Association (IMCA) New York Consultants Conference on January 10, IMCA introduced its new president, John Granzow, who began a two-year term on January 1. He is managing director of investments at Wells Fargo Advisors, LLC, in Charlotte, North Carolina. In addition, IMCA announced that Sean Walters will be its new executive director, when Edythe (Dede) Pahl retires on March 1. Pahl announced her plan to retire last summer. Walters has been IMCA's deputy executive director since June 2007.

? The Securities and Exchange Commission (SEC) has appointed Carlo V. di Florio as director of the agency's embattled Office of Compliance Inspections and Examinations (OCIE). OCIE, formerly headed by Lori Richards, received a lot of scrutiny from Congress and the industry for failing to detect the Bernie Madoff Ponzi scheme. As head of OCIE, di Florio will oversee the SEC's nationwide examination programs for investment advisors, broker/dealers, mutual funds, credit rating agencies, and self-regulatory organizations among other entities.

? The SEC also adopted December 16 custody rules that would require advisors who have custody of clients' assets to submit to annual surprise examinations by outside auditors. The new rules, the SEC says, "provide safeguards where there is a heightened potential for fraud or theft of client assets." According to the SEC, the rules "promote independent custody and require the use of independent public accountants as third-party monitors. Depending on the investment adviser's custody arrangement, the rules would require the adviser to be subject to a surprise exam and custody controls review that are generally not required under existing rules."

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