More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Anti-Fraud Provisions of the Investment Advisers Act RIAs and IARs should view themselves as fiduciaries at all times, whether they meet the legal definition or not. Deviating from the fiduciary standard of full disclosure while courting clients may cause the advisor significant problems.
The Securities Investor Protection Corp. (SIPC) said it expects its Board of Directors to announce in mid-September, its decision concerning the referral provided by the Securities and Exchange Commission (SEC) with respect to the liquidation of the Stanford Group Co., operated by Robert Allen Stanford.
SIPC, which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, filed an action on Feb. 17, 2009, in the U.S. District Court for the Northern District of Texas alleging that Stanford orchestrated an $8 billion fraud based on false promises of guaranteed returns related to certificates of deposit (CDs) issued by the Antigua-based Stanford International Bank (SIB).
SIPC says the SEC’s Complaint alleged that SIB sold approximately $7.2 billion of CDs to investors by promising returns that were “improbable, if not impossible.” SIPC explained in a release that in response to the SEC’s request for emergency relief, “the Court immediately issued a temporary restraining order, froze the defendants’ assets, and appointed a receiver to marshal those assets.” The SEC filed an amended complaint on June 19, 2009, alleging that Stanford conducted a Ponzi scheme.
SIPC President and CEO Stephen Harbeck said in the release that SIPC “has already started conferring with the SEC and the Stanford receiver regarding the SEC’s referral in the Stanford matter.”
The SEC’s referral on June 15 was the first time the SEC had informed SIPC of the possibility that the Stanford matter was appropriate for a proceeding under the Securities Investor Protection Act (SIPA).