More On Legal & Compliancefrom The Advisor's Professional Library
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
- 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.
(Updated on 3/3/10 10:00 a.m.)
The Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) are teaming up to more closely monitor and regulate the municipal bond market and industry.
SEC Chairman Mary Schapiro and IRS Commissioner Doug Shulman signed a Memorandum of Understanding (MOU) on March 2 which the two agencies say is designed to improve compliance with SEC and IRS rules and regulations related to municipal securities. The SEC states in its release announcing the venture that the muni bond market currently totals about "$2.8 trillion in outstanding securities and continues to grow in complexity and size."
"Through cooperative relationships like this, we are better positioned to protect investors and ensure they are getting the information they need when investing in municipal securities," said Schapiro, in the release.
"As part of the regulatory community overseeing the municipal bond market, we are encouraged by today's announcement," MSRB Executive Director Lynnette Kelly Hotchkiss told Investment Advisor in an email. "Compliance with municipal market rules and effective enforcement are vital for investor protection. An agreement between the SEC and the IRS makes sense, given how closely intertwined securities and tax law requirements can be for municipal securities. The MSRB will continue to provide support for the two agencies wherever possible."
The SEC and IRS said that the two agencies will work "cooperatively to identify issues and trends related to tax-exempt bonds in the municipal securities industry and to develop strategies to enhance performance of their respective regulatory responsibilities." To support this effort, the two agencies say they will work through a standing Tax Exempt Bond/Municipal Securities Committee to discuss policy, procedures, and compliance issues.
The SEC and IRS will also share information as appropriate regarding market risks, practices and events related to municipal securities, among other things, the two groups say. In addition, the two agencies will collaborate on educational and other types of outreach efforts.