More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- 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.
One year ago this week, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law.
By passing and signing the Dodd-Frank legislation, Congress and the President signaled the beginning of a new era of investor protection and financial market oversight. Reforms now taking shape at the national level are giving new authority to state securities regulators to address the challenges facing 21st century investors.
In the months since Dodd-Frank became law, a number of provisions have worked their way through the implementation phase. Other reforms, however, have been targeted for delay – or worse – by those who choose to ignore the devastation the Wall Street collapse caused to Main Street investors throughout the nation. The landscape is littered with victims of the financial crisis.
The Wall Street reforms and investor protections in Dodd-Frank were born out of necessity. The financial crisis made it clear that the existing securities regulation regulatory landscape needed an overhaul.
This comprehensive law was developed to promote stronger investor protection and more effective oversight to help prevent another economic crisis from threatening the financial security of Mom and Pop investors.
As Dodd-Frank’s one-year anniversary approached, the Senate Banking Committee met on July 12 to hear how this landmark legislation has strengthened investor protection. I was among the witnesses called before the committee.
I was pleased to hear Committee Chairman Tim Johnson (D-SD) open the hearing with a strong answer to the critics of Wall Street reform by saying, “I believe we must give these provisions a chance to work to protect investors and American families who depend on our financial system.”
The Dodd-Frank Act is providing meaningful, tangible benefits to investors. For example, it requires the SEC to raise standards that are long overdue and blocks fraudulent actors from taking advantage of exemptions that should be reserved for reputable issuers. It empowers the SEC to raise the standards under which broker-dealers provide investment advice to ensure that the interests of investors come first. And the law also recognizes the investor protection contributions of state regulators by increasing our authority over the regulation of investment advisers and by ensuring we have a voice on both the SEC’s investor advisory committee and the Financial Stability Oversight Council.
Dodd-Frank outlined ambitious reforms to be implemented by federal regulatory agencies. Some delay is to be expected. However, state securities regulators are concerned about any effort that might derail or delay important investor protections.
A lack of adequate funding already has forced the SEC to defer a number of valuable investor protections promised by Dodd-Frank, such as the creation of the Office of Investor Advocate and the Investor Advisory Committee. SEC Commissioner Luis Aguilar recently said that this committee is of “critical importance to ensuring that the SEC is focused on the needs and the practical realities facing investors.”
Also, controversies over the Consumer Financial Protection Bureau have indefinitely delayed the creation of a senior investor protection grant program to support state initiatives to protect vulnerable seniors from individuals using misleading professional designations.
My message to Congress was simple and clear: Please continue your commitment to protecting investors and do not weaken the critical investor protections of Dodd-Frank either directly through legislative repeals or indirectly through a lack of adequate funding.