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.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Senators Daniel Akaka (D-Hawaii) and Robert Menendez (D-New Jersey) plan to introduce on Thursday, May 6, their amendment to Senator Chris Dodd's financial services reform bill requiring brokers to adhere to a fiduciary duty
The expected introduction, confirmed by two industry sources with knowledge of the Senators' plans, came as that body continued debating the financial services reform bill on May 6, with the main focus centering on the Consumer Financial Protection Agency. Since the Senate began debating the bill on May 3, 100 amendments have been introduced but only two have been debated.
Senate Banking Committee Chairman Christopher Dodd (D-Connecticut), said in his speech on the Senate floor on May 6 that the legislation "before the Senate creates an independent consumer protection bureau. That word--independent--is important. We have seen that when an agency has consumer protection added to a portfolio already stocked with other objectives, consumer protection falls by the wayside. We know this to be true, because there are currently seven agencies tasked with consumer protection, not one of which did the job to anyone's satisfaction in the lead up to the crisis."
Dodd went on to detail how the consumer agency, under the legislation, would "have an independent director, appointed by the President and confirmed by the Senate. It will have a dedicated and independent budget, paid by the Federal Reserve Board. It will have a new Office of Financial Literacy to ensure that consumers are able to understand the products and services they're being offered, and a national toll-free consumer complaint hotline so that Americans have somewhere to go when they need to report a problem. And...it will be empowered to write consumer protection rules governing any institution--whether it's a bank or a payday lender--that offers consumer financial services or products."