More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- 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.
Senate Republicans urged regulators on Thursday to slow down implementation of Dodd-Frank by extending the comment periods on their rule proposals and conducting more “rigorous” analysis on those rules.
During the first hearing held by the Senate Banking, Housing, and Urban Affairs Committee on regulators’ progress in implementing Dodd-Frank, Sen. Richard Shelby, R-Ala., ranking member on the committee, said that regulators are operating under an “unrealistic deadline under Dodd-Frank,” and he questioned whether the “speed of the [implementation] process” was undermining the public’s participation in commenting on the rules.
But Sen. Tim Johnson, D-S.D., chairman of the Committee, noted that while the task of implementing Dodd-Frank “must be done with great care to avoid unintended consequences that could impair economic growth,” the “effective and timely implementation” of Dodd-Frank “will help strengthen the economy by creating certainty for the business community, consumers and investors. In turn, that certainty will bring market participants back to the table and restore consumer and investor confidence.”
Noting the budget crunch that the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) are under, Sen. Bob Corker, R-Tenn., asked SEC Chair Mary Schapiro whether it would make sense “to slow you guys down” in implementing Dodd-Frank so the agencies “can invest in technology and people.”
But Schapiro (left) replied that the budget constraints under the continuing resolution (CR) that the SEC is operating under is impacting the agency’s ability to fulfill its core mission, Dodd-Frank aside. The budget afforded to the SEC under the CR, she said, is hampering the agency’s ability to “hire examiners” and to allow those examiners to travel for enforcement cases and to allow the agency to build the technology “to do the job right now.”
As to Dodd-Frank, Schapiro went on to say that the SEC will need additional funding to examine hedge fund and municipal advisors as well as swaps dealers. “Getting the rules written [under Dodd-Frank] is a stretch and a challenge,” she said, “but the real crunch comes after the rules are in place and we have to operationalize them.”
Sen. Robert Menendez, D-N.J., told Schapiro that it would be a “hollow promise [to investors] to write rules but not be able to enforce them,” adding that this fact should be weighed as the budget process moves forward.
If the SEC has adquate resources, Schapiro told lawmakers, her goal is to also hire more economists at the agency. "We are recruiting for a chief economist and would like that person to head the [SEC's] Division of Risk, Strategy and Innovation," Schapiro said in response to question from Shelby.
Gary Gensler, chairman of the CFTC, told committee members his agency, too, is in dire need of more funds to hire staff and implement newer technology. “This past year [the CFTC] got back to staffing levels of the 1990s,” Gensler said. Under the current funding level, the CFTC “can write the rules,” he said, noting that a quarter of the agency’s staff is working on the rulemakings, but under the current CR, the agency has had to make technology and travel sacrifices. “The technology is the key to move forward” in overseeing a derivatives markets that is “seven times the size of this agency.”
Under President Obama’s 2012 budget, the SEC would get a 28% funding increase to $1.427 billion--a 27% boost over the current continuing resolution (CR) that the agency is operating under, while the CFTC’s budget would be boosted to $308 million. Under the 2011 CR that the House is debating this week, the SEC would see a budget cut of $41 million below the current CR that the regulator is operating under that was passed in December 2010 and expires on March 4.
Republican Senators sent a letter on Feb. 15 to all the top regulators asking that they “not sacrifice quality and fairness in exchange for speed,” in fulfilling their statutory mandate under Dodd-Frank. The letter was sent to Federal Reserve Chairman Ben Bernanke (left); Schapiro; Gensler; Sheila Bair, chairman of the Federal Deposit Insurance Corp. (FDIC); and John Walsh, acting director of the Comptroller of the Currency. All of the regulators testified at Thursday's hearing.
In the letter, Shelby and Michael Crapo, R-Idaho, asked regulators to extend their comment periods on proposed rules under Dodd-Frank from 40 days to 60.
The Senators pointed to the request for a more rigorous economic analysis raised by SEC Commissioners Kathleen Casey and Troy Paredes in the SEC’s study under Section 913 of Dodd-Frank, regarding putting brokers under a fiduciary standard of care.