More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- 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.
A three-judge appeals panel ruled Wednesday that Bernard Madoff’s investors can’t sue the U.S. Securities and Exchange Commission for failing to uncover his massive Ponzi scheme. The ruling deals a final blow to investors who claimed negligence on the part of the regulatory body.
Bloomberg reports that while the court said the regulator’s action was “regrettable,” it is also shielded by law, citing the “discretionary function” exception to a law permitting people to sue the U.S. government, which it said applies in cases filed by Madoff victims. In its finding in the case, titled Molchatsky v. U.S., 11-02510, U.S. Court of Appeals for the Second Circuit, the New York-based panel upheld a lower-court decision to the dismiss suits.
“Despite our sympathy for plaintiffs’ predicament (and our antipathy for the SEC’s conduct), Congress’s intent to shield regulatory agencies’ discretionary use of specific investigative powers” defeats the investors’ claims, the court said, according to the news service.
As Bloomberg notes, in April 2011, U.S. District Judge Laura Taylor Swain in Manhattan threw out a $2.5 million suit filed two years earlier by investors Phyllis Molchatsky and Steven Schneider, who blamed the SEC’s grossly negligent oversight of Madoff’s firm for their losses.
Madoff pleaded guilty to orchestrating what is widely considered one of the largest financial cons in history. He was sentenced to a 150-year term, which he is serving in federal prison in North Carolina.
Read Madoff Letter: Insider Trading Has Gone on ‘Forever’ on AdvisorOne.