More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- 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.
The North American Securities Administrators Association (NASAA) recently outlined an aggressive advocacy agenda calling for affirmative congressional action to promote sustained investor confidence by keeping U.S. capital markets free and fair.
Our legislative agenda also provides the 113th Congress with a roadmap to promote investor confidence by striking the most reasonable balance between promoting capital formation and protecting investors.
This agenda, the most comprehensive NASAA has developed, is built on a foundation that seeks to:
—Promote market accountability;
—Promote greater transparency and systemic stability, and to reduce market volatility;
—Ensure investor protection provisions of the Dodd-Frank Act are implemented;
—Ensure all investors are protected when receiving individualized investment advice; and
—Provide the strongest protection for Main Street investors.
I encourage you to read our agenda on NASAA’s website.
Our agenda calls for Congress to ensure all investors are protected when receiving individualized investment advice. This revolves around two key issues. The first is to improve the oversight of federally registered investment advisors by providing the SEC with the resources it needs to do the job. The second is to see that the SEC expands the fiduciary standard of care currently applicable to investment advisors to broker-dealers who provide personalized investment advice.
Investment Advisor Regulation
Recognizing current political realities, NASAA believes that the most effective and efficient way for Congress to improve the oversight of federally registered investment advisors is to enact legislation authorizing the SEC’s Office of Compliance Inspections and Examinations (OCIE) to collect user fees from the investment advisors it examines.
We are very encouraged that Rep. Maxine Waters, D-Calif., the ranking member on the House Financial Services Committee, recently indicated that she soon plans to reintroduce legislation to authorize the SEC to assess user fees on investment advisors to fund an expansion of its advisor examinations.
As a matter of efficiency and cost, authorizing the SEC to fund enhanced oversight of federally registered investment advisors through the imposition of user fees also makes more sense than establishing a new SRO for investment advisers.
It is time for the SEC to pursue the course recommended more than two years ago in its Dodd-Frank mandated study (Section 913) and subject broker-dealers to the same fiduciary duty standard currently applied to investment advisors when those brokers offer personalized investment advice to retail investors and other customers.
The establishment of a uniform fiduciary duty standard governing the conduct of broker-dealers and their agents is crucial for the protection of investors. A fiduciary standard for broker-dealers will guarantee that all financial professionals providing investment advice will act in the best interests of their clients, and in turn, enhance investor confidence in the financial services industry and securities markets.
NASAA also urges Congress to encourage the SEC to exercise its authority mandated by Section 921 of Dodd-Frank to propose or adopt rules prohibiting or conditioning pre-dispute agreements mandating arbitration.
States are seeing the emergence of mandatory pre-dispute arbitration clauses in contracts between state registered investment advisers and their clients, despite the fiduciary duty imposed upon investment advisers.
NASAA will seek legislation in the 113th Congress empowering state regulators to curtail the use of such clauses and to take the steps necessary to provide investors with a choice for dispute resolution.
Lawmakers and the industry continue to chip away at the ability of small investors to seek remedies for securities law violations. Just recently, a FINRA hearing panel ruled that Charles Schwab Corp. could force all of its customer disputes into arbitration and prohibit investors from bringing class-action lawsuits.
Harmed investors should be able to seek relief in any forum and not be forced into an expensive arbitration that could foreclose the ability to obtain relief.
To ensure that victims of securities fraud will have recourse, NASAA has urged the 113th Congress to explore amending federal law to ensure that all investors, especially those investing small amounts, have a reasonable avenue to seek recovery.
Taken together, our legislative priorities represent positive and progressive changes for the benefit of Main Street investors. NASAA is committed to working with the Obama administration and the 113th Congress to ensure that our nation’s system of financial services regulation promotes the investor confidence necessary to support a strong U.S. capital market.