More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- 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.
Harvey Pitt, a former Chairman of the Securities and Exchange Commission, took shots at the Dodd-Frank Act on Monday. “Each page drips with multiple unintended consequences,” said Pitt, speaking on the first day of the Super Bowl of Indexing conference held in Phoenix.
Pitt (left) also cast doubt on the new legislation’s ability to deal with future crises and argued it had created layers of additional bureaucracy.
The former SEC chair from 2001-03 told attendees that lawmakers should have taken time to fully understand the root causes of the financial crisis before creating legislation.
The Dodd-Frank Act was signed into law in July 2010 and a full review of the causes and effects of the financial crisis is due to be released by the SEC by the end of the year.
Also speaking on the Super Bowl of Indexing conference’s first day was Joanne Hill, Head of Investment Strategy at ProFunds Group and ProShares, who noted three substantial shifts in indexing over the past 15 years.
First, index investing strategies have evolved from plain vanilla stock indexes to asset classes like commodities and fixed income. She also noted that the growth of investment vehicles like ETFs, ETNs and structured products have made indexing strategies more accessible. Lastly, Hill explained how clients using index-based strategies had expanded beyond institutional investors to touch financial advisors and their clients. A representative of San Francicso-based Charles Schwab backed this last claim, remarking that 81 percent of RIAs trading through its platform now use ETFs.
Read Harvey Pitt’s views on Dodd-Frank at AdvisorOne.com.