More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
As Congress readies to hold hearings on the Securities and Exchange Commission’s (SEC) budget this week, Bloomberg is reporting that the Boston Consulting Group’s (BCG) preliminary review of the SEC, which was mandated by the Dodd-Frank Act, has found that the securities regulator needs 400 more employees to manage its current workload.
A spokesperson for BCG says that the report, which entails a top-to-bottom analysis of the SEC, has yet to be finished and will be delivered to the SEC and members of Congress by March 14, as mandated by Dodd-Frank.
On Thursday, March 10, Rep. Steve Garrett, R-N.J., chairman of the House Financial Service Committee’s Subcommittee on Capital Markets and Government Sponsored Enterprises, and Sen. Jack Reed, D-R.I., chairman of the Senate Banking Committee’s Subcommittee on Securities, Insurance, and Investment will both hold early morning hearings on the SEC’s budget. The following week, on March 15, the House Appropriations Committee has scheduled its own hearing to dissect the agency’s budget.
“The next couple weeks are very important for the SEC,” says Stephen Crimmins, a former deputy chief litigator at the SEC who’s now a partner at K&L Gates in Washington.
The SEC’s budget will be a negotiating tool as members of Congress try to hammer out a long-term solution regarding the 2011 federal budget. During this critical time, the SEC remains “in a period of risk” as to whether it will see the budget boost it needs, Crimmins says. “Things [on Capitol Hill] are still fluid” regarding SEC funding, he says, adding that members of Congress are still debating where they stand on a funding increase for the agency.
The BCG findings follow numerous outcries from within the SEC, among members of Congress and industry executives that the securities regulator is in desperate need of more money to do its job. “The SEC is critical to pulling us out of the worst financial crisis” since the Great Depression, Crimmins says.
According to Bloomberg, the BCG report also cites poor communication between the agency and self-regulatory organizations (SRO) the agency oversees, including the Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers. Bloomberg cites the BCG report as suggesting “the SEC could adopt a much deeper and broader oversight program specially dedicated for FINRA” and that it needs “multiple and deep lines of defense” against gaps in FINRA regulation.