From the April 2010 issue of Investment Advisor • Subscribe!

B/D News

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.
  • Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm.  States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.

The House passed in early March legislation creating a uniform licensing system for insurance agents and brokers. The National Association of Registered Agents and Brokers Reform Act of 2009 (H.R. 2554), also dubbed NARAB II, was introduced by Reps. David Scott (D-Georgia) and Randy Neugebauer (R-Texas), along with 44 additional bipartisan cosponsors. Marliss McManus, senior federal affairs director for the National Association of Mutual Insurance Companies (NAMIC), said in a statement that NARAB II "provides common sense reforms that level the playing field between states for agents, allowing licensed agents to offer their services across all jurisdictions without impeding on the regulatory rights of the states themselves." NAMIC says that the legislation would establish the National Association of Registered Agents and Brokers through which one set of licensing, continuing education, and other insurance producer qualification standards could be adopted and applied on a multi-state basis. However, NAMIC states, "it would preserve the right of states to license, supervise, discipline, and establish licensing fees for insurance producers, as well as to prescribe and enforce laws and regulations with regard to insurance-related consumer protection and unfair trade practices."

Madoff victims beware. The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, is alerting international regulators about a "look-alike" Web site for a fictitious organization that is mimicking the SIPC Web site in an apparent attempt to target Madoff victims. SIPC says the phony organization dubs itself the "International Securities Investor Protection Corporation (I-SIPC.com)" and copies several aspects of the SIPC Web site artwork and structural design. "It is soliciting Madoff victims to submit claims, which SIPC is warning could result in 'phishing' or other identify theft problems," SIPC said in a statement. "The phony group claims to be based in Geneva and also maintains that it has ties to the United Nations and the International Monetary Fund, among others."

The phony group's Web site includes a supposed testimonial from a Madoff victim who received funds from the organization. SIPC says that "in a link from the homepage of the site that leads to a photo of a huge stack of U.S. currency, the group falsely claims to have collaborated with Interpol to recover $1.3 billion in Madoff money from a hideout in Malaysia."

The North American Securities Administrators Association (NASAA) said the Texas State Securities Board has finalized a settlement with UBS Securities LLC and UBS Financial Services Inc. that requires the companies to purchase up to $200 million in auction rate securities (ARS) from investors who were not covered in UBS's initial agreement with state and federal regulators. The March 4 Consent Order finalizes a national settlement with UBS over its sale of auction rates securities, which brokerage firms marketed as safe and liquid alternatives to cash, NASAA says. "UBS will continue to repurchase approximately $22 billion in auction rate securities from investors across the country--including up to $2.7 billion from Texas investors. UBS will also pay a fine of $6.64 million to the General Fund of the State of Texas by March 12, 2010," NASAA says.

According to the Consent Order, UBS will provide $200 million of relief nationally to holders of auction rate securities who were left out of the initial settlement. These investors were not covered because UBS, in the earlier settlement, agreed to buy back securities only from investors who held the securities in accounts at UBS, according to NASAA. The Consent Order covers non-institutional investors who purchased auction rates securities from UBS but moved their accounts from UBS before February 13, 2008, NASAA says investors who believe they are covered by the Consent Order are encouraged to contact UBS about their auction rate securities holdings.

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