From the October 2010 issue of Investment Advisor • Subscribe!

About Those Other SEC Studies ...

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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.

Among the litany of studies (close to 17 of them, along with 95 rulemakings) that the SEC is charged with conducting under the Dodd-Frank Act, the advisory industry will be greatly affected by about five of them.

One of those five, the fiduciary study, is already under way with the SEC required to submit its report to Congress in January. Dodd-Frank also stipulated that the Government Accountability Office's (GAO) study of the regulation of the financial planning industry is to be submitted to Congress 180 days after the signing of Dodd-Frank into law, which means lawmakers should have the GAO study by late January.

Financial Planner Study (GAO): To examine the effectiveness of state and federal regulation of financial planners.

Study Concerning Improving Access to Registration Information for BDs and RIAs (SEC): To develop recommendations about improving investor access to registration information on BDs, RIAs, and associated persons of these entities.

Review of BD Auditors (PCAOB): To examine financial audits of broker-dealers.

Investment Adviser Examination Study (SEC): To examine whether an SRO should be designated to oversee RIAs.

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