From the June 2010 issue of Investment Advisor • Subscribe!

June 1, 2010

The Regulators Never Sleep

More On Legal & Compliance

from 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.   
  • Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isn’t 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 firm’s strategy is proprietary.

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) announced May 10 that the two agencies have formed a joint committee that will address emerging regulatory issues. The Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues was one of the 20 recommendations included in the agencies' harmonization report issued last year.

The two agencies say that the joint Committee will develop recommendations on emerging and ongoing issues relating to both agencies. The first item on the committee's agenda was conducting a review of the market events of Thursday, May 6, in which the Dow Jones dropped 1,000 points.

The SEC and CFTC say that the Committee's charter provides for a broad scope of interest, including:

o Identifying of emerging regulatory risks.

o Assessing and quantifying the impact of such risks and their implications for investors and market participants.

o Furthering the SEC's and CFTC's efforts on regulatory harmonization.

Chairman Mary Schapiro of the SEC and Chairman Gary Gensler will serve as co-chairs of the Joint Committee.

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