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.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
When Hurricane Sandy blew into town, in addition to all the storm damage, it brought a whole lot of potential problems, as well as nastiness that had nothing to do with the weather and everything to do with man's baser instincts. FINRA and the Securities and Exchange Commission have issued warnings and bulletins to help both advisors and the public better cope.
For financial professionals, FINRA issued a notice regarding regulatory and compliance relief for those directly affected by the storm.
Regulatory Notice 12-45 deals with a number of issues, "including emergency office relocations, continuing education requirements for registered personnel, registered personnel engaged in active military duty, regulatory filings and inquiries, membership applications and customer communications."
The body also pointed out that there are additional Sandy advisories on its website at a dedicated page.
For the public, the SEC issued an investor alert regarding investment and other scams, such as Ponzi schemes, that surface in the wake of the storm and other such calamities. A particularly popular form of such disaster scams that it warned of was the cleanup scam, in which "promoters [tout] companies purportedly involved in cleanup efforts…"
In particular, the agency warned, "We also heard about fraudsters targeting individuals receiving compensation from insurance companies. Individuals, including those receiving lump-sum insurance payouts, should be extremely wary of potential investment scams related to Hurricane Sandy." [Emphasis theirs.]