More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Just in time for election season, the Securities and Exchange Commission (SEC) issued Friday an alert to strengthen compliance with a Municipal Securities Rulemaking Board (MSRB) rule that limits political contributions by municipal securities professionals to campaigns of public officials of issuers with whom they are doing or seek to do business.
The risk alert issued by the agency’s Office of Compliance Inspections and Examinations (OCIE) notes that SEC examiners have observed practices that raise concerns about firms’ compliance with their obligations under MSRB Rule G-37, which clamped down on so-called “pay-to-play” practices.
These concerns include:
- Compliance with the rule’s ban on doing business with a municipal issuer within two years of a political contribution to officials of the issuer by any of the firm’s municipal finance professionals
- Possible recordkeeping violations
- Failure to file accurate and complete required forms with regulators regarding political contributions
- Inadequate supervision
The Risk Alert identifies practices that examiners have seen some firms use to comply with applicable federal, state and local rules on contributions. These include training programs for municipal finance professionals, self-certification of compliance with restrictions on political contributions, surveillance for unreported political contributions, and preclearance or restrictions on political contributions when permitted by state or local law. The Risk Alert stresses that the practices are described only to inform firms about approaches being used to strengthen compliance efforts; these practices may not be applicable to a particular firm, and other practices may be appropriate to consider instead.