More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
During a session I happened to moderate on Oct. 10 at the Financial Planning Association’s Denver 2010 annual confab, the best and the worst of the independent advice-giving business was on display.
The good? On a beautiful Sunday morning, a nearly SRO-crowd of several hundred advisors spent an hour trying to learn about the Dodd-Frank financial services reform bill. Pretty evenly split between SEC- and state-regulated RIAs and dually registered advisors operating under FINRA rules, the audience listened to Barbara Roper of the Consumer Federation of America, Joe Borg of the Alabama Securities Commission (and two-times past president of NASAA) and Dan Barry, the FPA’s government relations guru, explain what is in the Act, which studies are now underway by the SEC and GAO, among others, and what the likely implications of Dodd-Franks’ implementation will be for advisors of all kinds. They listened, they asked thoughtful questions, and they clearly were trying to make sense of the 2,300-page bill and what it would mean for their businesses and clients.
(See my news article on the session).
The bad? During the Q&A, one advisor lamented the increased regulatory burden felt by him and his 17 employees, pleading for relief from more government interference. Barbara Roper responded by saying she was amazed that this argument was being presented following the near collapse of the world’s financial system because of poor regulation, and (to be fair, as she mentioned to me later) because of poor enforcement of existing regulations. The plea provoked heartfelt applause from the audience, as did the response.
Yes, as every small business person knows—and as your medical doctor clients could tell you—the paperwork and sheer human capital commitment to following government rules and regs is highly annoying, not to mention expensive and time consuming. It’s also part of the price of being in a business, and one of the marks of being a professional.
Joe Borg responded to the plea by saying he couldn’t have “one set of rules for the good people, and another for the bad people.” Bob Clark has long written and more recently blogged on this same issue.
I would only add that if advisors wanted to be treated as professionals by the public, by regulators and in the media, they should start accepting the fact that they will be regulated. You are important enough to be regulated, and the interconnectedness of the world financial system requires that you be regulated to protect consumers and that system.
Some advisors seem to get that, and some still don’t.