More On Legal & Compliancefrom The Advisor's Professional Library
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
- 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.
A day before the Securities and Exchange Commission was expected to release a long-awaited final rule regarding reforms to money market funds, the Financial Services Roundtable urged the agency to halt releasing the rule, stating that it could have negative tax consequences on American businesses and others’ ability to get financing.
The Commission will consider on Wednesday whether to adopt amendments to certain rules under the Investment Company Act of 1940 that govern the operation of money market funds as well as related amendments to Form PF under the Investment Advisers Act of 1940.
The SEC’s new Form PF must be completed by registered investment advisors that manage $150 million or more in assets attributable to private funds. There continue to be questions about the applicability of the form.
The SEC’s new money market fund rule "could negatively impact American charities, hospitals, universities, nonprofits, and state and local governments that rely on money market funds for retirement plans and other cash needs,” Tim Pawlenty, president and CEO of the Financial Services Roundtable, said in a Tuesday statement. “Unless the tax provision questions are addressed, the new rule will result in significant new regulatory and bookkeeping burdens, which will likely be passed on to borrowers who rely on these funds as a cost-effective, high quality source of financing.”
The Roundtable is an advocacy group for banks, insurers, asset managers and credit card companies, among others in the financial services industry.
Under the SEC's money market rule changes, when a money fund investor purchases or redeems shares, the investor will have to report gains and losses for all of these transactions. While these gains and losses could be very small, the companies that use these products as a cash management tool and the investors who buy and sell the funds will now need new systems to track these changes.
David Tittsworth, CEO of the Investment Adviser Association, told ThinkAdvisor on Tuesday that reports have indicated the SEC will adopt a “hybrid” of what the Commission “proposed for money market funds last year and that it will be a 3-2 vote,” with SEC Chairwoman Mary Jo White, and SEC Commissioners Luis Aguilar and Daniel Gallagher supporting the final rule, and Commissioners Michael Piwowar and Kara Stein opposing it.
The final rule is said to impose a floating net asset value (NAV) on so-called “prime” money market funds and gates and fees on other money market funds, Tittsworth said.
The changes to Form PF will likely be “more of a conforming amendment to disclosures required by Form PF, rather than a substantive amendment,” Tittsworth added.
Check out SEC Ripped Over Analyses of Rules by Mercatus Study on ThinkAdvisor.