More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Elizabeth Warren, chief architect of the Consumer Financial Protection Bureau (CFPB), warned consumer groups on Thursday that while American families now “have the agency they need, they will have to fight to save it” from the “Goliaths” like lobbying groups and members of Congress who want to weaken it. There will be those who want to “deny” the CFPB “authority, funds, and a place in government,” Warren said during a speech at the Consumer Federation of America’s (CFA) financial services conference in Washington.
Indeed, Rep. Randy Neugebauer, R-Texas, a member of the House Financial Services Committee, said in remarks at the same conference that “top” on his list of priorities will be making sure Congress has more oversight over the CFPB. Another priority for the next Congress, he said, will be “watching the implementation of Dodd-Frank so that it doesn’t become more far-reaching.”
With 240 rulemakings required under Dodd-Frank, there will be “unintended consequences” stemming from those rulemakings that “will influence market forces,” he said. Neugebauer noted that “technical fixes” will need to be made to Dodd-Frank. He also predicted that Rep. Spencer Bachus, R-Ala., ranking GOP member on the House Financial Services Committee, will be, as expected, the committee’s new leader. Bachus has already voiced concerns about the “power” the CFPB wields and Warren’s willingness to testify before Congress.
In laying out her priorities in building the CFPB from “the ground up,” Warren said the agency will refrain from focusing on “targeted rulemakings,” as it would “limit” what the agency could achieve. “Targeted rules,” she said, “don’t fundamentally change credit markets.” Instead, she said, “we need to think more expansively about credit regulations and credit markets.”
Warren went on to say that while there was “much more disclosure” today about financial products, there was also “much less understanding” among consumers about those products. The CFPB, she said, “should have been law years ago,” before the mortgage meltdown ensued. “If mortgages had been clearer,” the economic meltdown of 2008 would not have unfolded as it did, she continued. “The crisis of 2008 was a preventable disaster.”
When asked what the CFPB can learn from Canada’s consumer regulatory agency, which launched in 2001, Warren said one lesson is that “good regulations help markets to function” more efficiently and takes “risk out of the market.” What’s more, she continued, Canada’s council of five regulators that meet to discuss emerging threats to financial stability includes a “consumer voice at the table.”
Her friends within the Canadian government, she said, say that having a consumer representative present when policies are being discussed “fundamentally changes how that discussion moves forward.” The Financial Stability Oversight Council, established under Dodd-Frank, is chaired by Treasury Secretary Timothy Geithner and includes a host of regulators as members, but not a consumer representative.