More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
Shareholders Service Group started providing services to RIAs nearly 10 years ago, and in that time has grown to where it can now count almost 1,000 advisors in its independent fold. On Wednesday in San Diego, SSG’s leadership kicked off its first ever national conference with an opening speech by President and CEO Peter Mangan that focused on trust. Noting that “trillions of dollars” were lost during the financial crisis of 2008-2009, Mangan said that something even more valuable was lost: trust.
While he pointed out that since the crisis ended in early 2009 the Dow has risen more than 100% over the ensuing three years, “it hasn’t been an enjoyable ride.” Investors, Mangan (left) said, no longer trust the markets or institutions like the big banks or wirehouses, and “the regulators don’t trust anyone.”
A big part of that loss of trust could be attributed to Bernie Madoff, who prior to his fall was considered a “prince and a genius,” but turned out to be “a crook and a fraud.” By contrast, “in a system with trust, there’s an ease to relationships,” and while investors no longer trust the big institutions, “they haven’t lost trust in the people around them.” Those people include SSG advisors, he suggested, who live by a fiduciary standard as RIAs. “The fiduciary standard,” he argued, “is supposed to show investors who they can trust.”
Referencing the current debate over which regulatory agency should serve as an SRO for advisors, Mangan suggested that one solution would be for FINRA to regulate those brokerage firms with RIA businesses, including dually registered representatives. If that were the case in the past, he said, perhaps the Madoff fraud might not have happened.
As for SSG, which was founded by Jack White alumni Mangan and Bob Reed after then TD Waterhouse acquired San Diego-based custodian Jack White in 1998, Mangan pledged to the several hundred RIA attendees that the company “was not for sale, in case anyone was wondering.” The CEO pledged that while the SSG leadership has been approached by companies for a possible acquisition, “we’re in it for the long haul,” promised to continue to serve SSG advisors and that “we’re private and intend to stay private.”
Read full coverage of SSG's 2012 Conference in San Diego at AdvisorOne.