More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
The House Financial Services Committee announced Wednesday that it will hold a hearing on June 6 on the redraft of Rep. Spencer Bachus’ bill calling for a self-regulatory organization (SRO) to oversee advisors.
Industry sources told AdvisorOne a day earlier that the hearing on the SRO bill, which Bachus (left), the Alabama Republican and Financial Services chairman, introduced April 25 with Rep. Carolyn McCarthy, D-N.Y., would take place on June 6 or 7 with a markup on the legislation likely on June 28.
Richard Ketchum, chairman and CEO of the Financial Industry Regulatory Authority (FINRA), told AdvisorOne on Tuesday after conducting a panel discussion at FINRA’s annual conference in Washington, that he expected the committee to hold a hearing on the SRO bill before Congress breaks on June 29 for the July 4 holiday.
FINRA is said to be a lead candidate in filling the SRO role.
While chances are good that the SRO bill will be reported out of the Financial Services Committee, odds of passage in the Democrat-controlled Senate Banking Committee are far less likely.
The Bachus-McCarthy bill, the Investment Adviser Oversight Act of 2012, would authorize “one or more self-regulatory organizations (SROs) for investment advisors funded by membership fees.”
The two lawmakers noted in introducing the proposed legislation that investment advisors and broker-dealers “often provide indistinguishable services to retail customers, yet only 8% of investment advisors were examined by the SEC in 2011 compared to 58% of broker-dealers.”
Said Bachus: “The average SEC-registered investment advisor can expect to be examined less than once every 11 years. That lack of oversight, particularly in the aftermath of the Madoff scandal, is unacceptable. Bad actors will naturally flow to the place where they are least likely to be examined. Therefore, it is essential that we augment and supplement the SEC’s oversight to dramatically increase the examination rate for investment advisers with retail customers.”