More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
SEC Commissioner Luis Aguilar told members of the Investment Advisers Association on Thursday that he remained unsupportive of a self-regulatory organization and continued to believe in the “highest” definition of a fiduciary standard.
“The issue is one of resources,” said Aguilar (left), who has been one of five members on the board of the SEC since 2008. “It’s really not the best choice to go the path of an SRO,” he explained in his remarks, which he made as an individual and not on behalf of the SEC.
In addition, there are issues of harmonization that make the SRO formation very complex, he described in a fireside chat during the IAA’s annual conference in San Francisco. Aguilar referred the roughly 200 members of the audience, as well as moderator and IAA Executive Director David Tittsworth, to his speech before them in May 2009.
Three years ago, the commissioner explained to the group, “I do not believe that the answer is to create another SRO — particularly when it would be one without any experience in dealing with the investment advisory industry and the Advisers Act regulatory tradition ... Now is not the time to fragment even more, but to consolidate and employ smart regulation.”
Aguilar, who was appointed by President George W. Bush, also said Thursday that the highest fiduciary standard was the best one -- “putting a client's interests above his or her own, and I believe the industry discussions about this have gotten sidetracked.”
Though he acknowledged that he'd opposed the Sarbanes-Oxley Act of 2002 because of the expenses it imposed on companies valued at more than $75 million, the commissioner said he's now more accepting of the legislation.
“The costs over the past few years have come down and normalized,” Aguilar stated. And, he added, he’s seen some issues come up with companies not subject to these rules.
As for the recently passed JOBS Act of 2012 design to support the growth on younger, smaller firms, the commissioner said the legislation was a “hodgepodge,” and the disclosure and other exemptions in it have raised concern among some experts.
“I used to be more cowboy-ish,” shared Aguilar. “Now I see the fleecing every week of hardworking men and women … I hope the JOBS act won’t lead to more of this. And I do fear that fraud will be easier to affect and harder to protect.”
When asked by Tittsworth (right) about his experience during the financial crisis, the commissioner shared that he considers himself a bit of a “workaholic,” and – before taking the job – had been concerned that he would have to take up a hobby to keep himself busy in his time away from the office.
Aguilar said he soon found himself working 16-18 hours a day and tackling issues like a ban on short selling, Ponzi schemes and troubles in money-market funds. “I can’t recall a time when the SEC was so busy,” he shared. “Now, things are not quite as intense.”
In describing the financial rule-making process in Washington, the commissioner said, “As you may have heard, you can enjoy sausages but don’t want to watch them being made,” Aguilar joked.
While Chairman Mary Shapiro controls the SEC’s agenda and budget, the organization also must grapple with many legislative mandates. “And we have to be reactive to the public at large,” the attorney said. “Our staff is the first line of defense … and we’re very grateful for visits for investment advisors and others.”
Overall, Aguilar says that he has a vigilant concern for the abuse of all investors, particularly seniors. “I’ve been vocal for a variety of reasons,” the commissioner explained. “There’s a lot of abusive chicanery, and I’ve watched this trend as [the industry’s] moved from broker-dealers to RIAs.”
Aguilar, who came to the United States from Cuba at age six, believes his work at the SEC is “payment to the debt I owe this country, and I’m glad to use my skills sets to benefit the public.” He also noted that he is “the only working lawyer ever to hold the SEC Commissioner’s slot.”
“I bring a real-world awareness to the job,” the former Invesco executive said, “… so that we can hopefully have smart regulation.”
The IAA’s Tittsworth then recognized Aguilar for his unique perspectives – both at the SEC and the group’s 2012 annual conference. “We are very pleased to see someone like you as head of SEC,” he said.