More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- 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.
The Senate Banking Committee’s Subcommittee on Securities, Insurance and Investment plans to hold a hearing on Nov. 16 to explore management and structural reforms at the Securities and Exchange Commission.
Chris Nagy, managing director of order routing strategy and co-head of government relations at TD Ameritrade, told AdvisorOne on Thursday that the hearing “could go anywhere” in terms of topics discussed—from issues surrounding the Financial Industry Regulatory Authority to the efficacy of creating a self-regulatory organization for advisors.
The SEC recently ordered FINRA to change its ways after FINRA provided altered documents requested by the SEC during an inspection at the Kansas City, Mo., office. Nagy, who just returned from a visit to Capitol Hill, said that in his meetings with lawmakers, they questioned whether the SEC is doing its job in overseeing FINRA.
Nagy said that during his visit to Capitol Hill, he also circulated copies of a recent white paper written by Georgetown business professor James Angel, which was supported through a grant by TD Ameritrade, that offered another option in lieu of an SRO for advisors: outsourcing routine advisor exams to external third parties, such as accounting and consulting firms.
Witnesses at the hearing, “Management and Structural Reforms at the SEC: A Progress Report,” will include all the directors of the SEC’s divisions: Robert Khuzami, Division of Enforcement; Eileen Rominger, Division of Investment Management; Carlo di Florio, Office of Compliance Inspections and Examination; Meredith Cross, Division of Corporation Finance; Robert Cook, Division of Trading and Markets; and Craig Lewis, Division of Risk, Strategy, and Financial Innovation.
The subcommittee is chaired by Sen. Jack Reed, D-R.I.
David Tittsworth, executive director of the Investment Adviser Association in Washington, D.C., says that as it stands now, “there does not appear to be any current appetite” in mandating third party compliance audits of advisory firms, as suggested by Angel’s paper.
“The main alternatives [to an SRO] being debated on Capitol Hill are increasing the SEC’s resources or expanding FINRA’s jurisdiction to investment advisors,” Tittsworth says. He anticipates a new draft of Rep. Spencer Bachus’ bill calling for a SRO for advisors to be out “very soon.”