More On Legal & Compliancefrom The Advisor's Professional Library
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
Mary Schapiro, chairman of the Securities and Exchange Commission, told a congressional appropriations panel on Tuesday that the Obama administration’s proposal to increase the SEC’s budget in 2013 to $1.566 billion, which is an 18.5% increase over the SEC’s 2012 appropriation, would help the agency add 676 staff positions–including 191 positions to the SEC’s enforcement division and 222 to the agency’s exam division–as well as revamp the agency’s outdated EDGAR system.
Schapiro told members of the House Subcommittee Financial Services and General Government Committee on Appropriations that the added resources requested for FY 2013 would allow the SEC to achieve four “high-priority” initiatives: (1) adequately staff mission-essential activities to protect investors; (2) prevent regulatory bottlenecks as new oversight regimes become operational and existing ones are streamlined; (3) strengthen oversight of market stability; and (4) expand the agency’s information technology systems to better fulfill our mission.
Rep. Jo Ann Emerson, R-Mo., chairman of the subcommittee, asked Schapiro why the agency needs a spending increase of $245 million over 2012’s level when the agency’s budget in 2011 also saw a $200 million increase over the previous year. “Most agencies haven’t received increases like the SEC,” Emerson said. “How have investors benefited from such large increases?” she asked Schapiro.
Schapiro replied that the agency recognizes “we are close to unique compared to other federal agencies” in its increased budget levels, but the SEC "was underfunded for years,” and the agency needs a boost in funds to deal with complex markets and financial transactions. Since the Bernard Madoff Ponzi scheme, “we have successfully restructured the enforcement program to focus on risky practices” and the agency’s exam program is now using a more risk based approach.
A central focus for the SEC in updating its outmoded technology, Schapiro said, would be to improve its EDGAR system of public company filings, which was last modernized in 2001. By modernizing it, the SEC could “decrease the cost of operating and maintaining that system dramatically,” Schapiro said.
The SEC would also use the added funds to update its own website, SEC.gov, as the site “has never been updated and is the gateway to EDGAR,” she said. The website gets a staggering 450 million hits per month, Schapiro said. The website “can work in real time and we can cut the cost of operating it.”
Schapiro added that the agency also has a goal of formulating a “consolidated data warehouse” to house the SEC's many systems containing disparate sets of data that exist in “silos".
When asked by Emerson what other areas the SEC could manage more efficiently, Schapiro said the SEC is also now undertaking a review of its 11 regional offices, as mandated under Dodd-Frank. There are “a lot of issues” to consider in reviewing the agency's regional offices, Schapiro said, and the SEC will be using “contractor support” to help the agency do so.
She said the SEC would assess things like each regional office’s productivity and proximity to investors, among other variables. Some offices, “have great stability and depth of expertise that we don’t want to lose” while other offices are in cheaper areas of the country and provide a cost benefit to the agency, Schapiro said.