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.
1911: Kansas becomes first state to enact law requiring registration of securities and brokers. Similar laws are adopted by most other states over the next two decades. They are known as "blue sky" laws, as they aim to combat what were referred to in one early case as "speculative schemes which have no more basis than so many feet of blue sky."
1929: Uniform Sale of Securities Act seeks to harmonize securities regulations across states. Only five states adopt it, however, and it is abandoned in 1943.
1933: During FDR's first 100 days in office, the Securities Act of 1933 becomes the first general federal law regulating securities issuance. It requires certain issuers to file registration statements with the Federal Trade Commission. Also, Banking Act, commonly known after its sponsors as Glass-Steagall, creates a separation between investment banks and deposit-taking institutions.
1934: Under the Securities Exchange Act of 1934, the Securities and Exchange Commission is created. The new agency has a statutory mandate to regulate stock exchanges and prohibit manipulative trading practices.
1938: Maloney Act provides for a national organization of brokers and dealers to create and enforce disciplinary rules. Consequently, the National Association of Securities Dealers is created in 1940, and the SEC has power to review its decisions.
1940: Investment Company Act and Investment Advisers Act require investment companies and advisors (then typically spelled "advisers") to register with the SEC. The legislation contains a fiduciary standard for advisors but exempts brokers as long as their advice is "incidental" to their brokerage services and not given special compensation.
1956: New effort to harmonize state rules results in Uniform Securities Act, which is adopted (albeit with variations) by most states. There will be later revisions in 1985 and 2002.
1964: Amendments to 1934 securities law extend reporting requirements to firms above a certain size that are traded over-the-counter rather than on an exchange.
1970: In reaction to late 1960s "back office crisis," in which some brokerages were unable to keep up with paperwork, the Securities Investor Protection Act sets up the Securities Investor Protection Corporation. The SIPC, funded by fees from broker-dealers, provides insurance to customers in case a brokerage firm goes under.
1974: The Commodity Futures Trading Commission is created with authority to regulate commodity-based futures contracts and other derivatives.
1975: Following a rule change at the SEC that terminates fixed commissions for brokers, Congress passes securities law amendments that outlaw such fixed commissions.
1983: Insider Trading Sanctions Act enables the SEC to seek triple damages for profits gained or losses avoided from trading on the basis of insider information.
1990: Market Reform Act, a reaction to the 1987 market plunge, gives the SEC expanded but temporary powers in a similar emergency situation. Further legislation that year expands the agency's authority to curtail insider trading and oversee penny stocks.
1999: Gramm-Leach-Bliley Act basically eliminates the Glass-Steagall separation of investment banking and deposit-taking institutions. The legislation enables banks to own broker/dealers and participate in the securities business, while providing for SEC regulation of such activities. It also has consumer-protection provisions regarding privacy.
2002: Sarbanes-Oxley Act, passed in the wake of scandals at Enron and other companies, tightens public accounting and corporate reporting requirements.
To see how the securities and brokerage industry is pondering compliance with the reform bill, follow Wealth Manager's Kate McBride's tweets from the SIFMA conference.