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.
- 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.
Republican members of the House Financial Services Committee aired their worries on Thursday that the Dodd-Frank Act will hamper U.S. competitiveness and drive capital and jobs overseas. At the same time, 10 GOP members on the Senate Banking Committee voiced their concerns the same day about reports from inspectors general reports that found the nation’s top regulators aren’t performing an adequate cost-benefit analysis on Dodd-Frank rulemakings.
During the House Financial Services Committee hearing titled, “Financial Regulatory Reform: The International Context,” the nation’s top regulators testified on their efforts to collaborate with international regulators as well as the plans to hold banks to higher capital and liquidity standards under Basel III.
Lael Brainard, undersecretary for international affairs at the Treasury Department, said during her testimony that while “some would argue that the United States is moving too fast” on financial regulatory reform under Dodd-Frank, and “that we should wait to see what other countries implement,” she disagrees. “I would argue that by moving first and leading from a position of strength, we are elevating the world’s standards to ours. By leading, we are investing in the future strength and resilience of the global financial system so that it yields results for the next generation of Americans.”
Securities and Exchange Commission (SEC) Chairman Mary Schapiro focused her testimony on the importance of international coordination in oversight of the over-the-counter derivatives (OTC) market—which she said now has a global notional value of $600 trillion. Title VII of the Dodd-Frank Act would bring this OTC market “under the regulatory umbrella,” she said.
GOP members of the House Financial Services Committee such as Rep. Steve Garrett (left), R-N.J., chairman of the House Subcommittee on Capital Markets, expressed their concerns that Dodd-Frank’s “overreaching policies” will send capital and jobs overseas. “Some substantial differences are beginning to emerge between Dodd-Frank’s financial reforms and those of the rest of the world,” Garrett said. “Instead of ‘you lead on reform and we will follow’; it’s now ‘you lead and we will pick and choose how we want to follow.’”
The U.S., Garrett continued, “now risks capital and jobs going overseas and severely impairing the global competitiveness of U.S. financial markets. The overreaching policies codified in Dodd-Frank have incentivized other countries to increase their taxable revenue through strategic regulatory arbitrage.”
Meanwhile, on May 4, 10 Senators on the Senate Banking Committee asked the IGs of the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve Board, the Office of the Comptroller of the Currency (OCC), and the SEC to review of the economic analysis performed by the regulatory agency under their supervision. The IGs reports were released on June 13.
Sen. Richard Shelby, R-Ala., ranking member on the committee, said that the IG reports “deepened” his concern “that the regulatory agencies charged with implementing Dodd-Frank are not undertaking the type of economic analysis that is necessary to reveal how Dodd-Frank will affect our economy.”
Shelby said in his June 16 remarks that the Republican Banking Committee staff will, “in the coming days,” conduct in-depth briefings with each of the inspectors general to discuss the methodologies and findings contained in their reports, as well as next-steps. “We must continue to monitor and improve the amount and type of analysis that the financial regulators are conducting in implementing this far-reaching law,” he said.
The SEC’s inspector general has stated that he will be conducting “a more in-depth review of the cost-benefit analyses performed by the agency under his supervision,” Shelby said.