More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
This is an extended version of the profile that appeared in the May issue of Investment Advisor, part of AdvisorOne's Special Report profiling this year's members of the IA 25, the most influential people in and around the advisor universe. See the complete list and Special Report schedule for extended profiles of all the 2011 members of the IA 25.
Controversial doesn’t begin to describe her. Loved by Democrats, criticized by Republicans; praised by the New York Times, disparaged by The Wall Street Journal, Elizabeth Warren is the living embodiment of the struggle for balance between consumer protection and market liberalization.
Warren is the Leo Gottlieb Professor of Law at Harvard Law School (currently on leave) where she taught contract law, bankruptcy and commercial law. As the chief architect of the Consumer Financial Protection Bureau (CFPB), she has faced both praise and skepticism from lawmakers about the agency she is constructing.
Nowhere was this more evident that at a hearing held in mid-March by the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, and one of the CFPB’s biggest opponents, said to Warren that while “no one questions your commitment to consumer protection,” the CFPB will “make the decision when consumers are protected and when they are not.” Bachus went on to say, once again, that the CFPB is “the most powerful agency in Washington” as it will be allowed to “regulate all consumer financial products and services,” and that the “definition of financial product or service will be defined by whoever is heading the agency.”
Besides mainly Republican lawmakers' worries that the CFPB's mission to protect consumers could trump safety and soundness concerns for financial services firms, they also want to rein in how the CFPB will be funded.
Rep. Ed Royce, R-Calif., argued that the CFPB, which was created under Dodd-Frank, “will be able to act outside the normal appropriations process” as neither the Fed nor Congress will have a say on the agency’s budget, which means the agency “will not be held accountable” for its actions. Congress tried this appropriations model with the government sponsored enterprises (GSEs), Fannie Mae andFreddie Mac, Royce said. “It did not work.”
But in a display of confidence that earned her the position in the first place, Warren countered that in terms of accountability, “Let me remind you of the [agency’s] structure: It is the only agency in all of government whose rules can be overruled, negated by other agencies,” she said. Under Dodd-Frank, “other agencies can come in under the Financial Stability Oversight Council and say, ‘We don’t like that rule.’” The CFPB, she continued, “should have the same independence” as the banking regulators that are funded outside of the political process."
Lawmakers also questioned the merit of one director to lead the CFPB, as opposed to a five-member board. But Warren said she believed Congress “made the right choice” in having one director head the CFPB. As to when a director would officially be named to head the agency come July, Warren said: “I understand there will be a nomination soon.”
Read more about the rest of the IA 25.
Don't see someone on this year's IA 25 that you think belongs there? Submit their name and your justification for why they should be considered among the most influential people in and around the advisor universe in the Comments field below. We promise to consider reader nominations, but please, no ad hominem attacks on those who were named in this or past years.--Ed.