More On Legal & Compliancefrom 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 underlying portfolio of securities that backed the synthetic collateralized debt obligation (CDO), named "ABACUS 2007-AC1," was connected to the performance of residential subprime mortgage backed securities (RMBS). The SEC complaint alleges it was not disclosed to investors that "a large hedge fund, Paulson & Co. Inc. ("Paulson"), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process."
The SEC further alleges that Paulson & Co., Inc., "effectively shorted the portfolio," by creating credit default swaps (CDS), with Goldman Sachs, and that Paulson, because of this "short interest," had "economic incentive" to pick RBMS that it expected would drop in value for the portfolio.Comments? Please send them to email@example.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.