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 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.
Rep. Randy Neugebauer, R-Texas, responded Friday to an SEC Inspector General report by saying an incident involving SEC staffers that left "unprotected" potentially sensitive market and business information “shows a frightening lapse of judgment by the SEC."
Neugebauer (left), chairman of the House Financial Services Committee’s Subcommittee on Oversight and Investigations, voiced disappointment on Friday over details found in an SEC Inspector General report that computer security breaches had occurred in the agency’s Division of Trading and Markets.
A Democratic Senate Banking Committee aide told AdvisorOne that "the Committee has begun its bipartisan due diligence, including a briefing with the SEC and the Interim Inspector General, and will continue to examine the situation."
Neugebauer was responding to a report by the SEC’s Office of Inspector General recounting an investigation that began in January 2011 over alleged mismanagement of a computer security lab in the Division of Trading and Markets Automation Review Policy (ARP) program. The ARP lab, as it is known, is used to support the Division of Trading and Markets' Office of Market Continuity inspection program. That inspection program, known as the ARP program, inspects self-regulatory organizations, stock exchanges and clearing agency computer networks, the report states.
The original anonymous complaint, the report states, alleged that ARP lab staff and management “inappropriately allocated and spent significant budget dollars to purchase computer equipment for the lab without justification or planning; used unencrypted laptops during inspections, in violation of SEC information technology security policies; and inappropriately used SEC funds for training without filing proper training forms.” The anonymous complaint also alleged “unprofessional behavior, ineffective management and misuse of unrestricted Internet access.”
While no information was compromised, according to the report, which Neugebauer called "fortunate,” he added that he was “very disappointed to learn about the cyber security problems at the SEC.” He further said he "looked forward to working with the Inspector General and the SEC to ensure that similar lapses never happen again.”
SEC spokesman John Nester told AdvisorOne in an email message that the SEC Inspector General found that "four staff members had used unencrypted laptop computers in violation of SEC policy. Although we found no evidence that data was compromised, the problem was fixed and the two staffers responsible for maintaining and configuring the equipment are no longer with the agency.”