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.
- 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.
The Securities and Exchange Commission (SEC) continued to file a record number of enforcement actions against investment advisors this year and increased its pace of actions against broker-dealers.
The SEC filed 147 enforcement actions against advisor and investment companies in 2012, one more than last year’s record number, and the number of actions this year against BDs jumped significantly—with the agency filing 134 enforcement actions related to broker-dealers, a 19% increase over the previous year.
The number of whistleblower tips is also on the rise. The agency announced Thursday in its 2012 Annual Report on the Dodd-Frank Whistleblower Program that it had received more than 3,000 whistleblower tips from all 50 states and from 49 countries. The report was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and summarizes the activities of the SEC’s Office of the Whistleblower.
“In just its first year, the whistleblower program already has proven to be a valuable tool in helping us ferret out financial fraud,” said SEC Chairwoman Mary Schapiro, in a statement.
As to enforcement actions taken in all areas of the SEC’s jurisdiction as of the fiscal year ended Sept. 30, the Commission says that building on last year’s record results, it filed 734 enforcement actions, one shy of last year’s record of 735.
Most significantly, the SEC says “that number included an increasing number of cases involving highly complex products, transactions, and practices, including those related to the financial crisis, trading platforms and market structure, and insider trading by market professionals.” Twenty percent of the actions, the agency says, “were filed in investigations designated as National Priority Cases, representing the Division’s most important and complex matters.”
The SEC also announced that it obtained orders in fiscal year 2012 requiring the payment of more than $3 billion in penalties and disgorgement for the benefit of harmed investors, which represents an 11% increase over the amount ordered last year. In the past two years, the SEC says it has obtained orders for $5.9 billion in penalties and disgorgement.
“The record of performance is a testament to the professionalism and perseverance of the staff and the innovative reforms put in place over the past few years,” said Schapiro. “We’ve now brought more enforcement actions in each of the last two years than ever before including some of the most complex cases we’ve ever seen.”
Other areas of enforcement actions taken include financial crisis-related cases, which included 29 separate actions naming 38 individuals, including 24 CEOs, CFOs and other senior corporate officers, regarding wrongdoing related to the financial crisis.
The SEC also filed 17 enforcement actions related to municipal securities, more than double the number filed in 2011.
Check out last week's enforcement roundup: FINRA Enforcement Roundup: Hudson Valley CEO Barred Over Sneaky Day Trading, Fraud at AdvisorOne.