More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- 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.
The Securities Industry and Financial Markets Association has submitted comments to the SEC to assist the regulatory group with its upcoming six-month study of the obligations of investment advisors and broker dealers.
"They've gotten a robust amount of responses and will go through them as part of the study," said Andrew DeSouza, a SIFMA spokesman, in a phone interview. "We'll continue to be engaged in this process."
After the study, which was mandated as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC is likely to move into the rule-making process, DeSouza says.
"There should be more comment periods, generally with draft rules, which will be open to public comment for 30 to 90 days. Next, there could be another draft rule with a comment period or a final rule," he explained.
SIFMA "has been very vocal on this issue for the past year and will continue to do so as the process moves forward," DeSouza said.
The industry group has generally supported a single standard of care to protect retail investors getting advice from stockbrokers and investment advisors.
In its August 30 comment letter to the SEC, SIFMA stressed the following priorities:
o The interests of individual investors should be put first.
o Broker-dealers and investment advisors should manage conflicts of interest by providing individual investors with full disclosures that are simple and clear and allows them to make informed investment decisions.
o Individual investors should continue to have access to a wide range of investment products and services, a choice among financial-service provider relationships and options for paying for financial services and products.
o Any standard of conduct adopted by the SEC should reduce confusion about existing legal and regulatory regimes by being the exclusive uniform standard that applies to broker-dealers and investment advisors, when providing personalized investment advice about securities to individual investors.
SIFMA also asked the SEC to ensure that broker-dealers can "provide individual investors with best execution and liquidity as principal and offer proprietary and affiliated products that certain investors desire."
The full text of SIFMA's comment letter can be found online.
The SEC is expected to complete the study and submit it to Congress by January 21, 2011.