More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Eileen Rominger, director of the Securities and Exchange Commission’s (SEC) Division of Investment Management, said Thursday that the securities regulator’s heavy workload under Dodd-Frank had not deterred the agency from moving forward on “extremely important” issues like 12b-1 reform and oversight of exchange-traded funds.
SEC Commissioner Elisse Walter said Friday that the SEC would turn its attention "full force" to 12b-1 reform in July.
Rominger (left), the former global chief investment officer at Goldman Sachs, who’s been in her new role at the SEC for two months, told mutual fund directors at the Mutual Fund Directors Forum’s policy conference in Washington, that product innovation, which “has been prolific” over the past few years among both mutual funds and ETFs, has lead to “complexity.” While the “extensive array” of ETFs that have been created are both “straightforward and complex,” she continued, some of the more complex ETFs “make extensive use of derivatives,” which is concerning from an investor protection standpoint.
The SEC is also moving forward with “phase two” of money market fund reform, Rominger said. The agency is “really pleased with what we are seeing and hearing in response to our first round of money market fund reform put in place last year.” Because of those reforms, “we are in a very different place today in terms of stability and liquidity of money market funds,” she said. The SEC plans to hold a money market fund roundtable at its headquarters on May 10 to get “substantive” feedback regarding further reforms, Rominger said.
Since moving from Wall Street to her current role at the SEC, Rominger said the securities regulator “has exceeded all my expectations; SEC staff have impressed me to no end.” However, Rominger said the division she heads, along with the entire agency, was still challenged by its technology, which she said was “way behind.” Another challenge, she said, was that her division has fewer staff members than it did “five years ago.”
Rominger also said that her division, along with other divisions at the SEC, were making sure “there are close lines of communication” with other agencies like the Commodities Futures Trading Commission (CFTC) and the Department of Labor (DOL). There’s been “tremendous receptivity to working together,” she said, noting her meetings with DOL regarding “target date funds, the definition of fiduciary, and a number of other issues.”