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.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Those of you who attended our annual conference earlier this month heard a lot about the changes facing investment advisers, broker-dealers and securities regulators alike.
My emphasis as president of the North American Securities Administrators Association (NASAA) will be our response to this evolving regulatory environment.
It should be little surprise that one of my goals as NASAA president is to fight against pre-emption or marginalization of state securities regulation by advancing our status as the most effective and balanced securities regulator in North America.
The events of the past year leave little doubt that this fight is far from over. Over the past 12 months, NASAA has battled against changes to Rule 506, crowdfunding and other preemptive provisions of the JOBS Act. We also fought Round One of the battle against imposition of a self-regulatory organization on state-registered investment advisers. While the first round of that battle may be over, I have no doubt that Round Two will start soon.
NASAA will continue to oppose state and federal legislation that may corrupt the delicate balance between investor protection and capital formation.
State securities regulators have long maintained a defensive position, using our admirable enforcement record to defend against attacks on our jurisdiction. But, reliance on our enforcement efforts has done little to stem the tide of preemptive legislation coming out of Washington.
The securities markets are too large and too diverse for one government regulator to oversee. Given the size and complexity of the market, state securities regulators are presented with a unique opportunity.
NASAA should conduct a critical self-examination, consider the changes to securities regulation brought about by globalization and rapidly changing technologies, and stake a claim to those areas where state securities regulators are the most efficient, effective and appropriate regulator—the regulator most likely to serve as a valuable resource to issuers, investors and the industry.
It is clear to me that NASAA should have an active voice that is not only heard by lawmakers, but heeded. However, history has proved that not to be the case.
How do we change this? We get aggressive, add offense to defense, and focus not only on protecting the existing jurisdiction of NASAA members, but utilizing our capabilities and expertise to expand this jurisdiction and influence.
NASAA must show that the role of state securities regulators strikes the most reasonable balance between investor protection and capital formation. If the JOBS Act is any indication, lawmakers appear willing to sacrifice reasonable regulation for perceived economic growth. However, reasonable regulation is essential to facilitate the investor trust necessary for economic growth.
The investment adviser switch presented the same sort of opportunity. State securities regulators excelled during the switch process, serving as invaluable resources to all those involved. Now it is up to us to prove that through reasonable, effective and efficient regulation of state-registered investment advisers, a self-regulatory organization is an unnecessary burden.
However, Regulation A+ and state-regulated investment advisers are not enough. State securities regulators should strive to be leaders in the timely development of uniform laws and regulations to address the rapidly changing issues in the markets.
This includes responses to developments in all areas of regulation. If NASAA members can speak timely with one voice on these issues, it will facilitate the continued development of a more efficient and effective system of state and provincial securities regulation across the board.