More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- 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.
As Securities and Exchange Commission Chairwoman Mary Jo White warned in early May, the agency is poised next week to propose further changes to money-market funds.
Washington insiders have speculated for some time that the new proposed rule will include a floating net asset value (NAV), for at least some of the riskiest funds.
Analysts at Washington Analysis said Thursday that they expect the SEC’s proposed rule to be “less onerous than past proposals, but strict enough to create headwinds for the industry.” Indeed, the analysts say that the most likely changes to be enacted by the commission will be a floating NAV for institutional prime money funds, “as well as some combination of liquidity fees and temporary gates prohibiting redemptions during times of stress.”
White has said the goal with further money-market fund reform is “to preserve the economic benefits of the product while addressing potential redemption pressures and the susceptibility of these funds to runs—runs in which retail investors are especially likely to suffer losses.”
The Investment Company Institute issued a statement Thursday stating that ICI expects the SEC’s proposal to “reflect the extensive research and discussion among commissioners and staff since last summer.” As White has said repeatedly, “the goals of any reform must include preserving the economic benefits of money-market funds—both for investors and for the businesses and state and local governments that rely upon these funds for financing.”
The Washington Analysis predicts a “deluge” of comments to flood in once the proposal is published, which could push back a final rule until year-end or later. “But we do expect a final money-market fund rule to ultimately be adopted by the SEC,” the analysts say.
The SEC says it will also consider at its June 5 meeting amendments to Form PF under the Investment Advisers Act. The form must be completed by registered investment advisors that manage $150 million or more in assets attributable to private funds.
Read SEC’s White Gets Short Shrift from Congress on AdvisorOne.