More On Legal & Compliance
from The Advisor's Professional Library- Regulatory Oversight of Investment Advisors Although the regulatory environment is in a state of flux, it is imperative that RIAs adhere to their compliance obligations. To ensure compliance, RIAs and IARs must fully understand what those obligations are.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isn’t just a recommended best practice— it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firm’s strategy is proprietary.
More boards are adopting clawback provisions, and looking more closely at risk oversight, according to a survey released on Monday by The Conference Board.
In the 2010 U.S. Directors’ Compensation and Board Practices Report, based on data gathered in May and June, questions spanned a broader range of subjects than previously, including CEO succession planning, say-on-pay, and gross-ups, as well as the aforementioned clawback provisions.
Matteo Tonello, director of corporate governance research at The Conference Board and an author of the report, said in a statement, “Over the last decade, our annual study has documented a steady transformation in the role of public companies’ boards, underscoring the increasing importance of directors’ monitoring responsibilities and the growing influence of shareholders. The new developments of the last few months alone, from the SEC regulation on disclosure enhancement to the governance provisions of the Dodd-Frank Act, illustrate the importance of capturing the practices we have added to our annual survey.”
Among other findings, the survey recorded that director compensation was more a factor of company size than of industry; the larger the company, the higher the compensation. Large financial services boards were found to be the least diverse, with the largest relative proportion of members who are CEOs, presidents, or board chairs of for-profit companies, rather than academics or accountants.
Larger companies are starting to institute clawback provisions; at least 40% of companies in the manufacturing and non-financial services industries have them, as do 36.6% of financial firms. Financial services companies are the ones primarily using say-on-pay. Nearly all financial companies with asset values of $10 billion or higher have a dedicated chief risk officer. And outside of the financial services industry, only 14.7% (manufacturing) and 18.3% (non-financial services) disclose succession planning to shareholders.
