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 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.
While we expect the 113th Congress to focus much of its attention on trying to resolve the nation’s fiscal issues, state securities regulators are watching three areas for possible congressional interest this year. They include:
- attempts to delay or derail Dodd-Frank-mandated regulations;
- another round of JOBS Act-related legislation (call it JOBS Act 2.0); and
- the lingering question of self-regulation for investment advisers.
Each of these areas will be addressed in the legislative agenda NASAA plans to unveil next month. Our agenda will be aggressive and will empower NASAA to speak with a reasoned and unbiased voice on behalf of small investors, whose voices cannot be heard over the din of the lobbyists and industry, while striking the most appropriate balance between industry and investors.
During the 112th Congress, we saw a legislative attempt to stall Dodd-Frank implementation by requiring independent regulatory agencies to submit proposed rules to the White House Office of Management and Budget’s Office of Information & Regulatory Affairs (OIRA) for review and analysis, including cost-benefit analysis, prior to being finalized.
“By empowering OIRA in this manner, S. 3468 could have profound, chilling affects on the ability of independent regulatory agencies to adopt rules that effectively protect the investing public,” NASAA wrote in a November 2012 letter to the Senate Committee on Homeland Security and Government Affairs opposing the legislation.
The clock ran out before this legislation could begin to move through the 112th Congress, but we expect legislation along this theme to continue, and possibly expand, in the 113th Congress.
JOBS Act 2.0
The 113th Congress also is likely to see another spillover from its predecessor in the form of capital formation legislation. Buoyed by the success of the JOBS Act, House Republicans may seek to advance a similar package of “capital formation” bills this year. It remains to be seen whether a second capital formation package will again be able to garner the kind of broad and bipartisan support that was the hallmark of last year’s bill. To some degree, this is likely to depend on the speed of the economic recovery and the successful regulatory resolution of a number of investor protection concerns raised by the initial JOBS Act.
IA SRO Round Two?
The third area on our radar revolves around the issue of self-regulation for investment advisers. This issue failed to gain ground in the 112th Congress, despite intense lobbying on its behalf by FINRA and some in the securities industry, but we don’t suspect we’ve heard the last of it.
NASAA’s opposition to the creation of new SROs, especially for investment advisers, is well documented. For an overview of some of our continuing concerns, I call your attention to an excellent article in the University of Pennsylvania Journal of Business Law by NASAA President-elect Steve Irwin and his colleagues at the Pennsylvania Department of Banking and Securities: “Self-Regulation of the American Retail Securities Markets – An Oxymoron for What is Best for Investors.”