More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
Allen Stanford and Jon Corzine: two names that have come to occupy the same sullied space as Bernie Madoff. While the calamities that both Stanford and Corzine, head of the now-defunct MF Global, oversaw didn’t reach quite the staggering proportions as the fraud perpetrated by Madoff, all three men’s action have not only forced regulators to police the financial services industry with more zeal, but has lawmakers scrutinizing regulators’ lax oversight of the industry.
Stanford, (left), was convicted in early March of running a $7 billion Ponzi scheme. He was found guilty on 13 counts of a 14-count criminal indictment, including fraud, conspiracy and obstructing an investigation by the Securities and Exchange Commission. He was found not guilty on one count of wire fraud.
At the urging of lawmakers, the Securities and Exchange Commission is suing the Securities Investor Protection Corp. to regain funds for Stanford victims. But SIPC’s president and CEO Stephen Harbeck told lawmakers in March that SIPC is not responsible for reimbursing Stanford investors. “SIPC protects the ‘custody’ function that brokerage firms perform,” which means “customers are protected against the loss of the cash and securities held for them by their broker-dealer” when the BD fails, Harbeck said. Stanford victims, however, “knowingly sent their money away from the brokerage” and bought certificates of deposit (CDs) issued by a bank in Antigua, he said.
No formal charges have been levied against Corzine, (left), but he’s apologized to congressional committees about MF Global’s failure and for the nearly $1.2 billion in client funds that went missing. “I simply do not know where the money is,” Corzine has told lawmakers. During one of his subpoenaed appearances before lawmakers he blamed the missing money on the “chaos” that surrounded the commodities broker-dealer in its final days as it tried to unwind its European sovereign debt holdings following a bad quarterly earnings report.
Find out who was named on the 2012 IA 25 in Investment Advisor's May issue.
Check out more extended interviews of the 2012 IA 25 at AdvisorOne.