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 Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Kevin Keller, CEO of CFP Board, told AdvisorOne that the Board's new director of investigations named March 15 would help police the growing number of CFPs. Rex Staples, the former general counsel for the North American Securities Administrators Association (NASAA), will start his new post as “top cop” on April 9, and will head a nine-person team to monitor and enforce compliance with the CFP Board’s standards of professional compliance.
The team will pursue its work of ensuring the organization’s approximately 65,000 members—a group that has grown some 20% since 2007—stick to the rules. Staples also spent nearly 10 years with the Washington State Securities Division, where he last held the post of branch chief for enforcement and compliance.
Keller (left) said the decision to create the new post and appoint Staples is not due to an increase in the number of compliance cases handled by the organization, but rather, said Keller, “to build our capacity to achieve our mission of benefiting the public.” While Keller said there has been “a gradual increase over time” of compliance issues, he pointed out that the membership of the organization has also grown substantially over the same period.
“I came [to the CFP Board] in 2007,” he explains, “and there are 20% more CFP professionals [now] than there were in 2007, so you might expect the number of cases to increase as well.” Still, at a time when all eyes are on compliance issues throughout the financial services industry, Keller pointed to Staples’ experience in enforcement and compliance in Washington—experience he said “should be directly transferable” to Staples’ new position.
While there may not be a flood of problems, two areas of conduct saw marked increases in public sanctions, according to the CFP Board: misrepresentation and bankruptcy. Bankruptcy, of course, could be due to circumstances beyond someone’s control, but from 2008-2010 there were 16 public sanctions in bankruptcy cases, with the overall number of such cases seeing a sharp increase from 2009-2010. Misrepresentation cases from 2008-2010 saw 30 public sanctions.
Keller says there are two main areas within the CFP Board’s enforcement process: the investigation side and the adjudication side. Staples will take charge of the former, reporting to Michael Shaw, managing director for professional standards and legal, and will, said Keller, lead the team of people who investigate alleged violations of standards of professional conduct.
In order to ensure that the enforcement process is expedient, consistent and fair to all of the participants, as well as being credible to the public, Staples “will be responsible for insuring we are investigating cases in an expedient way and [that] they’re brought to the disciplinary and ethics commission in a way that helps them make their decision,” Keller said.