More On Legal & Compliancefrom The Advisor's Professional Library
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
The Securities and Exchange Commission (SEC) on Wednesday, May 26, proposed a new rule in reaction to the May 6 market plunge requiring self-regulatory organizations (SROs) to establish a consolidated audit trail system that would enable regulators to track information related to trading orders received and executed across the securities markets. The SEC also voted unanimously to approve rule changes improving the quality and timeliness of municipal securities disclosure.
SEC Chairman Mary Schapiro said that if adopted, "this consolidated audit trail would, for the first time, allow the SEC and other market regulators to track trade data across multiple markets, products and participants in real time. It would allow us to rapidly reconstruct trading activity and quickly analyze both suspicious trading behavior and unusual market events."
Last year, the SEC says it set up an agency-wide task force to carry out the audit trail initiative and begin the process of developing the rulemaking proposal recommended to the Commission on May 26. The SEC says its proposal seeks public comment and data on a broad range of issues relating to a consolidated audit trail.
The same day, the SEC approved rules designed to provide enhanced information to municipal securities investors by further regulating those who underwrite or sell such municipal securities.
As it stands now, municipal securities, such as municipal bonds, are exempt from the disclosure requirements of the federal securities laws, the SEC says. As such, the SEC's statutory authority is limited. Today's measures, the SEC says, "will strengthen existing requirements for the scope of securities covered, the nature of the events that issuers must disclose, and the time period in which disclosure must be made." The compliance date of the new rules is December 1, 2010.
"These rule changes will enable investors to make more knowledgeable decisions about municipal securities by requiring more timely and relevant information on an ongoing basis," Schapiro said. "Although I believe that the SEC's regulatory authority over the municipal securities market should be expanded in order to better protect investors and issuers alike, these measures represent an important improvement within our present statutory authority."