More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- 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.
Just as Steve Irwin, Pennsylvania Securities Commissioner and chairman of the Federal Legislation Committee for the North American Securities Administrators Association (NASAA), was warning members of the House Financial Services Capital Markets Subcommittee at a hearing on Tuesday to not trump states’ authority in potentially requiring a self-regulatory organization (SRO) for advisors, the newly christened NASAA president was beating the same drum miles away.
In testimony before the House Financial Services Committee’s Capital Markets Subcommittee, Irwin told lawmakers that NASAA remains “vigorously” opposed to the creation of an SRO for advisors. NASAA’s “primary position” regarding investment advisor regulation, Irwin told lawmakers, “is that it should continue to be the responsibility of state and federal governments, and that these regulators must adequately carry out their responsibilities.”
Investment advisor regulation, he continued, “is a governmental function that should not be delegated to a SRO. Even if Congress adopts a SRO model, state securities regulators and the SEC must be maintained as the primary regulators of investment advisers.”
The Financial Industry Regulatory Authority (FINRA), which was the only SRO option discussed at the hearing, “should be answerable to the appropriate government regulators, not the other way around, as both a legal matter and as a matter of fact.”
Rep. Spencer Bachus (left), R-Ala., chairman of the full House Financial Services Committee, conceded at the hearing that if lawmakers are able to come to a “bipartisan agreement” on an SRO “there would have to be protection for state regulators and enhanced oversight over FINRA.”
Duane Thompson, senior policy analyst for fi360, told AdvisorOne on Wednesday that “it’s a safe bet” that an SRO bill will come out of the House this fall. But an SRO bill will likely face opposition in the Democratically controlled Senate.
Jack Herstein, assistant director of the Nebraska Department of Banking and Finance Bureau of Securities, began on the same day a one-year term as president of NASAA, replacing David Massey, North Carolina deputy securities administrator. For the past year, Herstein has served as NASAA’s president-elect.
In addressing NASAA’s annual conference in Wichita, Kan., on Tuesday, Herstein said his presidency will focus on ensuring that state regulatory authority is preserved. “As we have seen since NSMIA, our authority has been under attack,” he said. “I ask fellow regulators to join us in resisting efforts to reduce investor protections by restricting or eliminating state regulatory authority.”
He noted that in 2010, state securities regulators conducted more than 7,000 investigations, which led to more than 3,500 enforcement actions, $14.1 billion ordered returned to investors and more than 1,100 years of jail time for securities law violators.
Herstein said the Dodd-Frank Act “recognized NASAA’s leadership and record of accountability and gave state securities regulators new authority to address the challenges facing 21st century investors,” noting that states are prepared for an increase of approximately 25% in the number of investment advisors who will come under state jurisdiction by mid-2012.