More On Legal & Compliancefrom The Advisor's Professional Library
- U.S. Securities and Exchange Commission Information This information sheet contains general information about certain provisions of the Investment Advisers Act of 1940 and selected rules under the Advisers Act. It also provides information about the resources available from the SEC to help advisors understand and comply with these laws and rules.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises plans to tackle two pressing topics when it re-convenes in September: the future of housing finance and the limitations of the Securities Investor Protection Act (SIPA).
While no specific dates for the September hearings have been announced, Subcommittee Chairman Paul Kanjorski (D-Pennsylvania) said in a news release that the subcommittee will continue its series of hearings on housing finance by conducting an oversight hearing of the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, while the full House Financial Services Committee will continue to exam policy options for restructuring the nation's housing finance system.
"By passing the legislation in 2008 that allowed the Bush Administration to put the GSEs into conservatorship and by finally enacting strict prohibitions against the sort of reckless, predatory and subprime loans that have been made in the mortgage market, we have completed the initial, defensive steps needed in the housing area," said House Financial Services Committee Chairman Barney Frank (D-Massachusetts), in a statement. "We will continue our efforts as we move to the next phase, a complete restructuring of the tangle of housing finance tools so that we move forward in a way that protects taxpayers, prevents economic turmoil and appropriately serves all aspects of the housing market."
Also on the September agenda will be a hearing to assess the limitations of SIPA, a law designed to return money and securities to the customers of failed brokerages. The hearing comes at the request of Rep. Gary Ackerman (D-New York), the Vice Chairman of the Capital Markets Subcommittee, and builds on provisions set out in the Dodd-Frank Wall Street Reform and Consumer Protection Act. This Capital Markets Subcommittee hearing will be the second in the 111th Congress on SIPA.
"The many complaints of investors after the failure of Lehman Brothers and the Madoff Ponzi scheme, along with a number of court rulings, make it clear that Congress needs to explore a comprehensive overhaul of SIPA," Kanjorski said in a statement. "As part of these efforts, we must also ensure that the Securities Investor Protection Corporation, the entity charged with implementing SIPA, follows the spirit of the existing law and works to protect the best interests of investors. Unfortunately, SIPC has denied the claims of customers based on statement balances provided to them by their brokers, yet SIPC expects customers to use those very same statements to report unauthorized trading in their accounts. This paradox results in a customer's statement being meaningless whenever it could harm SIPC, but not when it harms the customer. We need to explore this inconsistency further."
The Dodd-Frank Act contains several provisions to raise the minimum assessments paid by brokerages to fund SIPC, increase customer cash advance limits, and provide coverage for futures held in investors' portfolio margin accounts, the subcommittee notes. But Kanjorski has said he is committed to exploring the need for further statutory reforms.