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.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
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.