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.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Citing the Securities and Exchange Commission’s “abysmal examination record” on investment advisors, Rep. Maxine Waters, D-California, ranking member on the House Financial Services Committee, on Friday called on the committee’s chairman, Rep. Jeb Hensarling, R-Texas, to convene a full committee hearing to consider “various legislative proposals” to boost the number of advisor exams.
One of the proposals that Waters said should be considered is H.R. 1627, the Investment Adviser Examination Improvement Act, authored by Waters and Rep. John Delaney, D-Maryland.
Waters' bill, which has been co-sponsored by 17 of the 28 Democrats on the committee and would authorize the SEC to collect user fees from advisors to improve examination frequency, has been languishing in the House since she reintroduced it last April.
Waters noted that her bill has been endorsed by the SEC’s Investor Advisory Committee, the advisor community and investor advocates.
In her letter, Waters wrote that “even though the SEC is responsible for overseeing 11,000 advisors that manage nearly $50 trillion in assets, the agency examines these advisors only once every 12 years, and 40% of advisers have never been examined.”
She continued: “To put this in perspective, brokers and dealers registered with the Financial Industry Regulatory Authority (FINRA) are examined every other year. Though the vast majority of investment advisors operate with integrity, Congress, the advisor community, investor advocates and the SEC all agree that the SEC’s levels of examination need to improve to help restore trust in our financial markets.”
Waters noted that “insufficient funding continues to undercut the SEC’s ability to oversee” advisors.
Waters also noted former House Financial Services Committee Chairman Spencer Bachus’ failed attempts to push through a bill that would have authorized a self-regulatory organization like FINRA to oversee advisors, as well as SEC Commissioner Daniel Gallagher’s recent idea to allow third-party exams of advisors.
Waters reminded Hensarling that the committee’s oversight plan for the 113th Congress “makes clear it will ‘review proposals that would harmonize the frequency of examinations of broker-dealers and investment advisors.’”
Said Waters: “I believe the time is right for the committee to conduct this review. Hardworking Americans saving for the future, as well as the investor advisor community, deserve to know that everyone is complying with the law.”
Check out Advisory Industry Wants More Exams (and Will Pay for Them, Too) on ThinkAdvisor.