Tags: regulation

Compliance professionals say there's going to be a rush of advisors trying to switch their registration from the SEC in about a month, but they admit that the details can get confusing.

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In particular, those who think they're done after they file the paperwork may get an unpleasant surprise as the March 30 deadline looms. 

For example, a lot of the state regulators actually check every line on the ADV for deficiencies, unlike the SEC, which seems to have only skimmed for glaring errors.

In other states, advisors need to file additional forms on a regular basis.

Bottom line: all A4A readers with AUM between $25 million and $100 million need to be ready now for the switch, or at least have their place in line. Otherwise, the third-party compliance firms will be busy.

You know what last-minute tax filing is like. Don't subject your registration to that kind of stress.

Tags: sec

It's rare that an industry embraces tighter regulation, but investment advisors who were dreading being handed to FINRA may welcome the Obama administration's ongoing efforts to boost SEC oversight.

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The White House's 2013 budget proposal earmarks an extra $245 million for the SEC, explicitly to hire new examiners to audit advisory firms.

This is interesting because it assumes that the SEC will still be in charge of RIA oversight in 2013.

Naturally, Congress can always mandate that advisors shift to a self-regulatory framework like FINRA in the new year, but based on this budget, there is no sign of that happening immediately.

While Congress will probably carve away some of that $245 million, what's left behind will probably keep advisors under their existing SEC mandate in the near term.

Over the long term, of course, advisors with a stake in who their regulator is need to keep lobbying to remind Washington who exactly they are and how they fit into the industry as a whole.

RIA oversight is just a sliver of what the SEC does. Both Congress and the White House tend to lump retail advisors in with hedge funds, institutional firms, and other entities with very little day-to-day operations in common.

Tags: Congress

The head of the House financial services committee, Spencer Bachus of Alabama, is under investigation for possibly violating insider trading laws.

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Bachus has established himself among advisors as an enemy of Dodd-Frank reform and one of the leading figures associated with "starving" the SEC -- itself a factor in the regulator's recent flirtation with handing RIA oversight to FINRA or another entity.

He is now under scrutiny after the Office of Congressional Ethics caught "numerous" suspicious trades on his financial records late last year.

Trading on classified information is not technically illegal for lawmakers, who can also theoretically vote in favor of their own portfolios.

Nonetheless, the House has moved to ban such practices amid widespread public outcry.

Bachus appears to have made $5,000 shorting the U.S. economy after a 2008 briefing indicated that conditions were dire.

His trades were not always successful, with his net worth shrinking 52% over the last seven years.

Tags: compliance

The regulators are cracking down on the people inside advisory firms responsible for enforcing policy: the compliance officers themselves.

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A few high-profile cases have seen compliance officers brought into SEC hearings for failing to fire brokers who break the rules.

Even if a compliance officer's recommendations are overturned by higher-up executives in the company, they're apparently still liable -- or at least subject to queries.

Unfortunately, no hard-and-fast rulings have come down yet, but the signal is clear. Compliance means not just monitoring activity, but discipline as well.

On the asset management front, Bruce Karpati, who co-runs that side of the SEC's enforcement division, warns that tighter oversight is on the way as well.

Watching the compliance team puts pressure on them to watch their firms and speak up loud and clear when something goes wrong.