If you think the SEC is having a field day with new regulations, just check out the number of enforcement actions the regulator has issued in the last year. In 2003, the SEC’s enforcement division filed 679 enforcement actions, more than in any previous year. SEC Chairman William Donaldson said at the recent conference of the Investment Counsel Association of America (ICAA) that “the SEC has also increased the frequency of examinations of those funds, advisers, and other market participants posing the greatest compliance risk, and [is] conducting more examinations targeted to areas of emerging compliance risk.”
Moreover, don’t be surprised if there’s a new face during your next exam. In a recent interview with Investment Advisor, Stephen Cutler, director of the SEC’s Division of Enforcement, said he’s now sending some members of his enforcement staff out with examiners. Cutler says he’s also “doing a better job of training, including offering Series 7″ licenses to his staff.
David Tittsworth, executive director of the ICAA, says an enforcement action can be more devastating to an advisor’s practice than regulation. “An enforcement action can have the most profound and direct effect on an advisor; it can paralyze your firm in the short term, and it can damage your firm’s reputation in the long run.”–Melanie Waddell