Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Regulation and Compliance > Federal Regulation > SEC

SEC Changes Advisor Ethics Code Rules

Your article was successfully shared with the contacts you provided.

NU Online News Service, May 26, 2004, 7:33 p.m. EDT – The U.S. Securities and Exchange Commission today voted unanimously to require investment advisors to beef up their codes of ethics.[@@]

The SEC changed Investment Advisers Act Rule 204A-1 and other rules to require advisors to adopt and enforce codes of ethics for their employees and other “supervised persons” by Jan. 7, 2005.

One section of an advisor’s code of ethics must establish standards of conduct for supervised persons that reflect the advisor’s fiduciary duties, the SEC says.

“Supervised persons will have to acknowledge, in writing, receipt of a copy of the code of ethics and any amendments,” the SEC says in a notice about the rule change.

The advisor’s code of ethics also will have to require supervised persons to comply with applicable federal securities laws and report any violations of the code to the advisor’s chief compliance officer.

Another, more narrowly focused section of an advisor’s code of ethics must require some high-level executives and other key employees, called “access persons,” to report their personal securities holdings and transactions, including transactions in mutual funds advised by the advisor or an affiliate.

The code of ethics will have to require access persons to clear any personal investments in initial public offerings and limited offerings, the SEC says.

The SEC proposed the changes in advisors’ codes of ethics in January. Since then, several parties that submitted comments, including a representative for a U.S. investment advisory affiliate of ING Groep N.V., Amsterdam, have suggested that the changes would cause problems for advisors and that the SEC needed to clarify the term “access person” and other terms used in the original version of the proposal.

In related news, the SEC voted to adopt amendments that will require a mutual fund to give consumers more information about breakpoint discounts on front-end sales loads.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.