More On Legal & Compliancefrom The Advisor's Professional Library
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The Securities and Exchange Commission proposed rules on Friday stemming from the Dodd-Frank Act. The new rules would require hedge funds and other private funds to register with the commission, increase the threshold for the SEC’s oversight of advisors to $100 million in assets from $25 million (resulting in the switching of 4,100 advisors to state oversight), and create new data warehouses for swaps transactions.
The proposed rules issued on Nov. 19 would also define venture capital funds, SEC Chairman Mary Schapiro said in her opening statements at the Nov. 19 meeting. Early next year, Schapiro said, the SEC will take up a proposed rule to consider the systemic risk of private fund advisors. The Commodities Future Trading Commission (CFTC) issued on the same day its own proposal on swaps data repositories.
The Commission proposed rules on Nov. 19 that would implement new exemptions from the registration requirements of the Investment Advisers Act of 1940 for advisors to venture capital funds and advisors with less than $150 million in private fund assets under management in the United States. A loophole currently exists in Dodd-Frank which exempts private fund firms with from $100 million to $150 million from registering with the SEC.
The SEC is seeking comments on all of the proposed rules.