More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
The Financial Industry Regulatory Authority (FINRA) is proposing a major expansion of its BrokerCheck service which would make records of final regulatory actions against brokers permanently available to the public, regardless of whether they continue to be employed in the securities industry. Under current rules, a broker's record generally becomes unavailable to the public two years after he or she leaves the securities industry and is therefore no longer under FINRA's jurisdiction. BrokerCheck is a free online service through which investors can instantly see the employment, qualifications, and disciplinary history of more than 650,000 brokers under FINRA's jurisdiction. FINRA estimates there are more than 15,000 individuals who have left the securities industry after being the subject of a final regulatory action and whose disciplinary history is not currently available on BrokerCheck. FINRA filed its rule proposal to expand BrokerCheck with the SEC in mid April. The SEC will publish the proposal in the Federal Register and solicit public comment in the near future. In 2008, FINRA says individuals used BrokerCheck to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
The Securities and Exchange Commission on May 5 filed fraud charges against several entities and individuals who operate the Reserve Primary Fund for failing to provide key material facts to investors and trustees about the fund's vulnerability as Lehman Brothers Holdings sought bankruptcy protection. In bringing the enforcement action, the SEC said that it also seeks to expedite the distribution of the fund's remaining assets to investors. In a complaint filed in U.S. District Court for the Southern District of New York, the SEC is asking for an order compelling a pro rata distribution of remaining fund assets, which would release a significant amount of money that is currently being withheld from investors pending the outcome of numerous lawsuits against the fund, the trustees and other officers and directors of the Reserve entities.
"We're taking the lead in this matter because we want to get money back into the pockets of the investors as quickly as possible," said SEC Chairman Mary Schapiro in a statement. "Through this action, we hope to avoid inconsistent rulings regarding a finite pool of money and assure a fair result." The Reserve Primary Fund "broke the buck" on September 16, 2008, when its net asset value fell below $1 per share.
Raymond James Financial Services, Inc., announced that it recruited several notable advisors during the firm's fiscal second quarter ended March 31, 2009. Among those joining the independent broker/dealer subsidiary of Raymond James Financial (RJF) are Dan Pimental, who came from Goldman Sachs in Hingham, Massachusetts, where he had revenue of $2.7 million and total client assets of $600 million; Fernando Erenata, formerly with Citigroup Global in Lisle, Illinois, who had $1.3 million in revenue with $125 million in client assets; and John O'Keeffe, also from Citigroup Global, in Fairfield, New Jersey, who had $1 million in revenue and $125 million in assets under management. In Akron, Ohio, Jason Dilauro came from Merrill Lynch where he and a partner had managed $250 million in client assets. Glenn Buckingham joined RJFS from Wachovia Securities in Camden, Maine, where he managed $200 million in client assets.