In today’s issue of Investment News, there’s a report that an official of the Securities Industry and Financial Markets Association [“SIFMA”] is suggesting that “the SEC should consider whether investment-adviser-only firms should be subject to supervision by a self-regulatory organization [i.e. Financial Regulatory Authority or “FINRA”] so that customers are assured the high level of supervision and oversight that brokerage customers already have.” These comments are apparently in response to the recent release of the recent report prepared by the Rand Corporation, which primarily concludes that experienced investors do not understand the difference between an investment adviser and a broker-dealer.
Category Archives: SEC
SEC Chair Previews Results of “Free Lunch” Seminar Exams
September 06, 2007
During recent testimony before the U.S. Senate’s Special Committee on Aging, United States Securities and Exchange Commission (“SEC”) Chairman Christopher Cox offered a preview of the results from the SEC’s targeted exams of financial firms that sponsor “free lunch” seminars in advance of the full release next week at the SEC’s “Senior Summit”. The following is an excerpt of SEC Chairman Cox’s comments regarding the SEC’s “free lunch” seminar exam findings:
Attention SEC Registered Investment Advisors: Are You in Compliance with Your Home State’s Rules?
July 13, 2007
If your firm is registered with the SEC, RIA Compliance Consultants wants you to be aware that the Investment Advisers Act of 1940 provides state regulators authority over federally registered investment advisors and their employees, albeit on a limited scope. Many SEC firms believe that because they are not registered with a state regulator, they are therefore exempt from all requirements and provisions states have mandated. While it is true that SEC firms should focus their attention on the Advisers Act and its rules, SEC firms need to be cognizant of the authority provided to state regulators under Section 203A of the Advisers Act. The following summarizes the actions state regulators may take under Section 203A.
Are 12b-1 Fees Paid to Registered Representatives in Violation of Investment Advisers Act of 1940?
June 26, 2007
As the United States Securities and Exchange Commission (SEC) has started to scrutinize the current practices related to 12b-1 fees, several securities industry commentators have noted that the payment of 12b-1 fees by mutual funds to broker-dealers is likely in violation of the Investment Advisers Act of 1940 for those registered representatives that utilize the 12b-1 fees as a method for paying such registered representatives for their monitoring and ongoing advice to clients regarding their investments.
SEC Announces New ComplianceAlerts
June 21, 2007
On June 14, the United States Securities and Exchange Commission (SEC) released its first ComplianceAlert to help chief compliance officers of SEC-registered firms (including registered investment advisors) learn about some of the common deficiencies being identified by SEC staff during regulatory examinations. ComplianceAlerts will be published periodically and posted on the SEC’s website for public viewing.
Broker/Dealer Exemption Rule Vacated
May 11, 2007
In a 2-1 decision issued at the end of March, the U.S. Court of Appeals for the District of Columbia Circuit threw out what is commonly referred to as the Merrill Lynch Rule, formally known as Rule 202(a)(11)-1 of the Investment Advisers Act of 1940. Under this rule, the SEC exempted certain broker-dealers from investment advisor registration even if the broker-dealers provide what many contend to be advisory services and charge a fee for such services. From its inception, the Financial Planning Association fought the rule and ultimately received a successful outcome with last week’s ruling. In the ruling, Judge Judith Rogers and Judge Brett Kavanaugh noted that the SEC exceeded its authority by exempting brokerage firms that charge asset-based fees from registration under the Advisers Act.
SEC Announces CCOutreach Schedule for 2007
March 08, 2007
The SEC has announced dates and locations for the 2007 CCOutreach Program regional seminars. Seminars are conducted by the various SEC regional and district offices, but seating is limited for the seminars and priority is given to CCOs of investment advisors and mutual funds.
SEC Chairman Issues Press Release Concerning Goldstein v. SEC
August 22, 2006
On August 7, SEC Chairman Christopher Cox issued a press release concerning the recent D.C. Circuit Court of Appeals decision in SEC v. Goldstein. In the release, Cox stated that the SEC does not intend to fight the recent decision of the Court which threw out the controversial hedge fund advisor registration rule that was effective earlier this year. This decision by the SEC effectively ends the most current debate of whether advisors to hedge funds fall under the Investment Advisers Act of 1940. However, while this current battle appears over, the issue is not.
SEC Extends Certain Provisions of Broker-Dealer Exemption Rule
September 28, 2005
Earlier this month, the SEC announced that it is extending the compliance date for certain provisions under the Certain Broker-Dealers Deemed Not to be Investment Advisers rule. Under the controversial rule, the SEC is allowing broker-dealers to continue to provide fee-based brokerage accounts without registering as an advisor. However, the SEC did rule that broker-dealers cannot use discretion in the management of fee-based accounts. In addition, financial planning services are no longer considered solely incidental to providing brokerage services. In other words, if you are a broker-dealer or registered representative of a broker-dealer and manage accounts on a discretionary basis; hold yourself out as a financial planner or as providing financial planning services; deliver financial plans to clients or represent financial planning services in any way; you need to cease such activity by January 31, 2006, or register as an advisor. Originally, broker-dealers had to be in compliance with these provisions by October 24, 2005.
SEC Sets National CCO Outreach Seminar for November
September 28, 2005
According to a September 26 press release, the first CCOutreach Program National Seminar will take place on November 8, 2005. The seminar is open on a first come, first serve basis and all Chief Compliance Officers of mutual funds and investment advisors are welcome to attend. However, the one day event is limited to the first 500 individuals that register with CCOs.
