More On Legal & Compliancefrom The Advisor's Professional Library
- Best Practices for Working with Senior Investors Securities examiners deal harshly with RIAs that do not fulfill their fiduciary obligations toward senior investors, as the SEC and state securities regulators view older investors as particularly vulnerable and in need of protection.
- 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.
House Financial Services Chairman Spencer Bachus (left), R-Ala., plans to introduce a redraft of his bill calling for a self-regulatory organization for advisors early next week, according to three top industry officials in Washington.
Duane Thompson, senior policy analyst with fi360, told AdvisorOne that "an SRO bill may be introduced next week with the possibility of a vote in [the financial services] committee next month." However, Thompson noted, committee "calendars can easily change from week to week." Thompson also says the bill may be "somewhat different from the original discussion draft" that Bachus introduced. The other two officials requested anonymity because of the sensitive nature of the issue.
The redraft of Bachus’ SRO bill comes despite the fact that economic analysis released by The Boston Consulting Group and commissioned by advisory trade groups found that creating an SRO would cost at least twice as much as providing the Securities and Exchange Commission with adequate funds to examine advisors.
A spokesman for Bachus' office told AdvisorOne via email that he could not confirm that a release of an SRO redraft would come next week.
Neil Simon, the top lobbyist for the Investment Adviser Association (IAA), warned at IAA’s compliance conference in early March that “If Bachus is determined to push [his SRO] legislation, he can get it through his committee—maybe on a party-line vote—and he can get it to the floor of the House.”
Simon said that while action on the floor of the House “is uncertain” as the SRO issue is not a high priority for lawmakers in this presidential election year, it’s “extremely likely there will be renewed interest [in the SRO issue] in the next Congress.”
Simon warned attendees at the conference that “FINRA has a significant in-house government relations staff that is focused on this [SRO] issue. We have a significant long-term challenge. You need to stay tuned and get involved.”
In its study mandated under Section 914 of Dodd-Frank, the SEC put forth three recommendations to help the agency better oversee advisors: impose user fees on registered investment advisors to help fund their exams; authorize one or more SROs to examine advisors; or authorize FINRA to examine dual registrants for compliance with the Investment Adviser Act.