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.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
President Obama on Monday selected Elisse Walter, an SEC commissioner, to succeed SEC Chairwoman Mary Schapiro after she departs on Dec. 14, but industry officials speculated that Walter will serve as an acting chairman until Obama selects a permanent chairman.
As widely anticipated, Schapiro, 57, announced Monday morning that she would depart from the agency next month. She had more than a year on her term left to run the SEC. Walter has served as acting chairman before, in late 2008 until Schapiro was nominated in January 2009.
Walter said in a statement issued late Monday that “Words cannot adequately express what an exceptional job my friend and colleague Mary has done for this great agency and the public we serve. I am deeply honored and humbled to be the SEC's next Chairman and to continue to serve alongside the talented and dedicated SEC Commissioners and staff who work tirelessly on behalf of America's investors.”
An SEC spokesperson told AdvisorOne that Walter (right) will be the “permanent” replacement for Schapiro. However, David Tittsworth, executive director of the Investment Adviser Association in Washington, says that Obama’s announcement on Monday that Walter would succeed Schapiro could indeed mean that Walter will be the “long-term chair,” but he believes it’s “more likely that Obama will nominate someone else.”
While Walter had been rumored to take over the reins from Schapiro, other potential permanent replacements that have surfaced include Mary John Miller, the Treasury Department’s undersecretary for Domestic Finance, who is rumored to be the top candidate. Richard Ketchum, CEO of FINRA, is also rumored to be interested in throwing his hat into the ring, as is Sallie Krawcheck, the former Bank of America and Citigroup executive.
Dan Barry, managing director of government relations and public policy for the Financial Planning Association, points to Obama’s term that he was “pleased to designate” Walter as SEC chairman after Schapiro’s departure. “I wonder about the term ‘designate’ as opposed to ‘nominate,’” Barry says.
However, former SEC Chairman Harvey Pitt told AdvisorOne that Walter could serve as chairman until the end of 2013, so "there's no rush" to find a permanent replacement for Schapiro.
Walter's term expired June 5, 2012, but a commissioner can stay on for an additional 18 months if not reconfirmed or replaced before then–in her case December 2013.
Schapiro said in a statement issued early Monday that “It has been an incredibly rewarding experience to work with so many dedicated SEC staff who strive every day to protect investors and ensure our markets operate with integrity.” Over the past four years, Schapiro said that the SEC has “brought a record number of enforcement actions, engaged in one of the busiest rulemaking periods, and gained greater authority from Congress to better fulfill our mission.”
Industry officials, however, took time to speculate on what Walter’s appointment means for a fiduciary rule for brokers to be issued by the agency as well as the likelihood of a self-regulatory organization for advisors being approved by Congress.
While Walter, a Democrat, has sided with Schapiro as well as the other Democratic Commissioner Luis Aguilar in “vigorously” advocating “that all investors should receive equal protection under the law from a uniform fiduciary standard,” she likely wouldn’t go along with putting brokers under the Investment Adviser Act fiduciary standard.
Walter has been a strong proponent of “harmonization” of BD and IA rules, Tittsworth says. “And she has been the most outspoken supporter of an SRO for investment advisers of all the SEC commissioners,” views he said are “consistent” with her long history at NASD/FINRA. “While she may say she’s supportive of ‘a’ fiduciary standard, I think it’s clear from the context of her speeches and statements that she does not support applying the Advisers Act fiduciary standard to brokers who provide investment advice.”
Pitt told AdvisorOne that he believes a fiduciary rule “will require a great deal of effort, especially now that there is a four-person commission.” More “pressing issues,” Pitt said, will be on the “SEC’s docket,” like Dodd-Frank Act rules that have yet to be adopted.
Walter has also remarked that the “number and frequency of advisor exams simply must increase,” which could signal her support of ensuring an SRO bill gets passed by Congress next year.