More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt 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 firms strategy is proprietary.
State securities regulators laid out their legislative agenda on Wednesday, and among their top priorities will be to fend off attempts to weaken Dodd-Frank and to “push hard” to encourage members of Congress to impose user fees on advisors to help the Securities and Exchange Commission (SEC) fund advisor exams.
Steven Irwin, the Commissioner for the Pennsylvania Securities Commission and 2011 legislative director for the North American Securities Administrators Association (NASAA), said that state securities regulators are urging members of Congress to move fast in holding hearings on the SEC’s Jan. 21 report to lawmakers regarding fiduciary duty, which was mandated under Section 913 of the Dodd-Frank Act, so that the SEC could launch into the rulemaking process. Congressional staffers on the House Financial Services Committee, Irwin said, have said hearings on the Section 913 study are likley to occur within a couple months.
David Massey (left), president of NASAA, said at the Wednesday briefing in Washington that NASAA will urge lawmakers to not "delay" implementation of Dodd-Frank by requesting additional studies on issues raised in Dodd-Frank-related studies. For instance, Congress could request an additional study be conducted regarding the questions raised in the dissent to the SEC's Section 913 study, which was put forth by the two Republican SEC Commissioners, Kathleen Casey and Troy Paredes.
In its report to Congress required under Section 914 of Dodd-Frank on enhancing advisor exams and oversight, the SEC offered lawmakers three options to help it better oversee advisors: impose user fees on registered investment advisors (RIAs); authorize one or more self-regulatory organizations (SROs) to examine advisors; and authorize the Financial Industry Regulatory Authority (FINRA) to examine dual registrants for compliance with the Investment Adviser Act. While NASAA supports funding the SEC at the $1.3 billion level authorized by Dodd-Frank for 2011, if additional funding is not awarded, Irwin said that “user fees are a very viable option.”
While NASAA opposes an SRO for advisors, added Massey, he conceded that FINRA along with another body could be appointed as SROs for advisors. But, he said, “it’s cheaper in the long run to go the user-fee route.” Another consideration that’s worth a look, he said, is a “pay-as-you-go” system to fund advisor exams.
Massey said NASAA will also work to ensure that the Senior Investor Protection grant program to be established at the Office of Financial Education at the Consumer Financial Protection Bureau (CFPB) gets off the ground and that the $8 million annual authorization for these grants is funded by Congress.
Protecting senior investors from fraud will be another priority for NASAA this year, and NASAA will work to ensure passage of the Senior Investor Protections Enhancement Act, which was introduced by Sens. Herb Kohl, D-Wis., and Bob Casey, D-Pa., in the last Congress. The bill would impose additional penalties when violations are directed against seniors (62 or older), including administrative penalities of up to $50,000 and civil penalties up to $50,000 for each violation.