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September 01, 2010 at 08:00 PM
Just when you thought that navigating the regulatory landscape couldn’t get any more difficult, surprise! Congress and the SEC have brought us a new initiative on custody, a new ADV format and a new $100 million threshold for RIAs (each of which I will address in detail in my upcoming columns).
As to custody, this is the same SEC that less than 10 years ago saw little value to a surprise CPA exam! It is hard to believe that advisors that serve as both trustee and manager to their own firm’s retirement plan must now undergo a surprise exam that will cost the firm thousands of dollars.
How does a CPA conduct a review of assets that are not maintained away from the advisor’s primary recommended custodian, but maintained at the custodian designated by their clients’ 401(k) plan sponsor? Surely, the SEC knew or should have known that the vast majority of advisors have no relationship with the plan sponsor or administrator, the only nexus being having possession of a client’s password so that the advisor can allocate among the plan’s investment alternatives.
As to the new ADV format, what makes anyone think that clients will read this version! This is the same SEC that hasn’t seen a written disclosure statement in over 10 years (including those of new registrants) except during sporadic regulatory examinations.
As for the new threshold of $100 million in AUM–with RIA firms under that amount being moved to state oversight–how will the states (many of which are in dire fiscal trouble) be able to administer the influx of advisors that will need to transition from SEC to state registration because they will fall below the $100 million minimum required to remain SEC registered? Of course, the states will impose higher fees, but higher filing fees do not equate to adequate regulatory oversight. Madoff and Stanford were registered, paid fees to the SEC, FINRA and others: a lot of good that did.
Aren’t advisors already subject to too many rules and requirements that have little to no relevance to their practices or the needs of their clients? Please don’t misconstrue, I have tremendous respect for the need for necessary regulation and for those whose job it is to ensure compliance therewith, but at some point, something went terribly wrong.
