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.
- Anti-Fraud Provisions of the Investment Advisers Act RIAs and IARs should view themselves as fiduciaries at all times, whether they meet the legal definition or not. Deviating from the fiduciary standard of full disclosure while courting clients may cause the advisor significant problems.
Securities and Exchange Commission Chairwoman Mary Jo White told the House Subcommittee on Appropriations Tuesday that the agency’s $1.67 billion budget request for FY 2014 would help the agency fulfill one of its top priorities: to add 250 examiners for advisors.
White told lawmakers that the 250 examiners would increase the proportion of advisors examined each year, the rate of first-time examinations, and the examination coverage of investment advisors and newly registered private fund advisors.
Fulfilling this goal, “would be an important step in a multiyear effort to increase coverage by our examination program to meet our regulatory responsibilities to investors who increasingly turn to investment advisers for assistance navigating the securities markets and investing for retirement and family needs,” White (right) told lawmakers.
While Rep. Ander Crenshaw, R-Fla., chairman of the subcommittee, reiterated that the SEC should not just get “thrown” additional funds considering its failures in catching the Bernie Madoff and Allen Stanford Ponzi schemes, White defended the SEC’s budget request, saying it was “essential to get the funding or we won’t be able to do our job.”
Crenshaw went on to note that since 2001, the SEC’s budget has increased by 300%. “Most agencies don’t get this kind of increase each year,” he said to White. “How do you think the average investor has benefited from these large increases?”
White responded that during her few weeks on the job she has “been struck by how vast, difficult and complex” the agency’s responsibilities are, and that the agency needs additional funding to keep up with the ever-changing markets and the SEC’s increased responsibilities under Dodd-Frank. She added that she would be a “faithful steward” of the additional funds.
The $1.674 billion budget request under President Barack Obama’s budget is a 27% increase, or $353 million, over the $1.321 billion provided by the continuing resolution (CR) the SEC was operating under this year.
Under the sequester, the SEC’s budget was cut by $108 million for 2013. Rep. José Serrano, D-N.Y., ranking member on the subcommittee, noted that while it would be an “unwise investment choice” for the subcommittee to cut funding for the agency that’s the “cop on the beat” for Wall Street and that ensures “a fair playing field” for the nation’s markets, he told White that “further cuts” were likely from the subcommittee.
White also said the SEC’s National Examination Program, which is “critical to improving compliance, preventing and detecting fraud, and monitoring market risks,” lacks the resources to allow the SEC to examine regulated entities and enforce compliance with the securities laws “in a way that investors deserve and expect.” Under the budget request, the SEC would be able to add 60 positions to improve oversight and examination functions related to broker-dealers, clearing agencies, transfer agents, self-regulatory organizations (SROs), and municipal advisors.
White reiterated that her “top priority” was to finish the remaining rulemakings under the Dodd-Frank and JOBS Acts, stating that as of now the SEC has proposed or adopted 80% of those rules, “but there are a lot that remain to be done.”
When asked if she would do a further restructuring of the agency’s various divisions, White responded that she would be “looking across the agency for further enhancements” to those made by former SEC Chairwoman Mary Schapiro to the enforcement and examination divisions. As to breaking down silos within the agency, “My management style is to break down silos anyway,” White said.
Read Mary Jo White: The 2013 IA 25 Extended Profile on AdvisorOne.