More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Mary Schapiro, Securities and Exchange Commission chairwoman, is worried about the complexities of the financial markets yet proud of the SEC’s accomplishments, and perhaps most importantly, she is confident that a fiduciary standard will be proposed by next year.
“I very much believe there should be a uniform fiduciary standard of care” for registered investment advisors (RIAs) and broker-dealers, Schapiro said during a Q&A session at the Securities Industry and Financial Market Association’s (SIFMA) annual meeting in New York on Tuesday.
“My hope is that by sometime next year we can go through a proposal,” Schapiro said. “It’s very important, and the passage of time has not discouraged me at all. There’s strong interest even from nontraditional voices. The devil is in the details, but I’m more confident that we will get it done, not less.”
Asked about her future at the SEC if President Obama wins re-election, Schapiro said she hasn’t given it much thought because she is focused on the day-to-day demands of her job.
“I love what I do, but I haven’t thought about what I would do after 2014 when my term ends,” she said. “I don’t have a date in my head.”
In addition to creating more of a level playing field for advisors, Schapiro said she is proudest of her efforts involving the hedge fund regulatory regime, the whistle-blowing program and the lasting effect she will have on steering the SEC through its toughest time in history.
“I’m incredibly proud about the enforcement program,” she said. “We don’t have criminal authority, but we aggressively use the civil authority we have,” including 110 major suits against individuals, 57 of which have been against top leaders such as chief executives.
Just last Friday, the SEC reported that 1,504 advisors to hedge funds and other private funds have registered with the agency since the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated such registration.
Yet worries remain. Looking at the global nature of the capital markets, Schapiro admitted that she is concerned about complex issues such as derivative regulation and the fragmentation around cross-border compliance. In a series of three recent meetings in London, Toronto and the U.S. with international regulators, Schapiro has been meeting with derivatives rules writers to go through them line by line.
Read Breach of Fiduciary Duty No. 1 Complaint in FINRA Arbitration Cases at AdvisorOne.