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.
- Best Practices for Working with Senior Investors Securities examiners deal harshly with RIAs that do not fulfill their fiduciary obligations toward senior investors, as the SEC and state securities regulators view older investors as particularly vulnerable and in need of protection.
Securities and Exchange Commission (SEC) Chairman Mary Schapiro on Thursday warned lawmakers on the first anniversary of the Dodd-Frank Act that the agency needs “significant additional resources” in order to proceed with the agency’s responsibilities under the law.
The SEC has proceeded with the “first stages” of implementing Dodd-Frank without the necessary additional funding, Schapiro said, because implementation over the past year has “largely involved performing studies, analysis and the writing of rules.” These tasks, she continued, “have taken staff time from other responsibilities, and have been done almost entirely with existing staff and without sufficient investments in areas such as information technology.”
However, Schapiro told members of the Senate Banking Committee that the new responsibilities assigned to the agency under Dodd-Frank “are so significant that they cannot be achieved solely by wringing efficiencies out of the existing budget without also severely hampering our ability to meet our existing responsibilities.”
Schapiro went on to explain that the budget justification the SEC submitted in February as part of President Barack Obama's FY 2012 budget request estimates that, over time, “full implementation of the Dodd-Frank Act will require a total of approximately 770 new staff,” of which many will need to be expert in derivatives, hedge funds, data analytics, credit ratings. The SEC “also will need to invest in technology to facilitate the registration of additional entities and capture and analyze data on these new markets.”
One of her biggest worries, Schapiro said, is for the agency to lack the updated technology to detect another “flash crash” that occurred on May 6.
Because Dodd-Frank requires the SEC to collect transaction fees to offset the annual appropriation to the commission, Schapiro said, “regardless of the amount appropriated to the SEC, the appropriation will be fully offset by the fees that we collect and will have no impact on the nation’s budget deficits.”
As it stands now, the SEC received a budget boost to $1.18 billion for this year and the agency’s budget will remain flat at that level in 2012.
Schapiro told lawmakers that if the SEC fails to receive additional funding, “many of the issues highlighted by the financial crisis and which the Dodd-Frank Act seeks to fix will not be adequately addressed, as the SEC will not be able to build out the technology and hire industry expertise and other staff desperately needed to oversee and police these new areas of responsibility.”