Archive for May, 2011

New SEC Whistleblow Rules

Sunday, May 29th, 2011

In a 3-2 vote, the SEC approved a new whistleblower program under the Dodd-Frank Act, which “is primarily intended to reward individuals who act early to expose violations and who provide significant evidence that helps the SEC bring successful cases.” Under the adopted rules, whistleblowers must voluntarily provide the SEC with original information that leads to successful enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions in excess of $1 million. However, persons holding certain positions — namely, compliance and internal audit personnel — are generally prohibited from collecting any such award.

Massachusetts Probing RIAs about Social Media

Friday, May 27th, 2011

According to an article from Ignites, MA securities regulators are probing investment advisers’ use of Facebook, Twitter, YouTube and other social media networks.  The MA Securities Division has mailed out a survey to registered investment advisers based in the state that asks about their business use of social media, according to a release.  The survey, which must be returned by June 8, also asks whether advisors that use  social media have “adopted procedures to ensure compliance with federal and state securities law,” the release states.

SEC lets whistle-blowers bypass internal programs

Friday, May 27th, 2011

The SEC will let corporate whistle-blowers collect as much as 30 percent of penalties when they report financial wrongdoing, even when they bypass companies’ internal complaint systems according to an InvestmentNews article.  SEC commissioners voted 3-2 today in Washington to establish a whistle-blower program to reward individuals who provide the agency with high-quality tips that lead to successful enforcement actions.

In setting the rules, the SEC rejected appeals to require that whistle-blowers make reports through companies’ internal compliance programs before going to the agency. Instead, the regulator increased incentives for internal complaints by permitting bounties for people whose tips are passed along on to the agency and expanding the time whistle-blowers can maintain their place in line at the SEC while reporting to the company.

California issues guidance to help advisers assess whether placement agents are lobbyists

Friday, May 27th, 2011

According to a recent IA Watch article, the California Fair Political Practices Commission has released a Q&A to help firms determine if the state’s new law regarding certain RIA placement agents applies to their firm.  The Q&Ain response to a letter written by the Chief Compliance Officer at Chicago Equity Partners, applies to firms that are soliciting certain government assets.

The California law is broad.  As IA Watch highlights, “[f]or instance, beware that communicating with a public pension fund before an RFP is issued could render that person a placement agent under the law. The FPPC indicates that this time period also covers “the entire process of obtaining a contract, from the time the public pension system issues an RFP until the contract award.””

New regulations across the pond promise to challenge advisers doing business there

Friday, May 27th, 2011

According to an article in IA Watch, the European Commission is expected to grant final approval on a new regulation (the Directive on Alternative Investment Fund Managers, or the “Directive”) that may become the standard for funds doing business in the European Union.

The Directive will require funds to register and disclose sensitive information to regulators and investors in exchange for the right of managers to “passport” or sell their funds across the E.U.  The Directive would likely not fully take hold for at least two years and some private funds would have until 2018 to comply.  To the extent a U.S. investment adviser markets a fund in the European Union, the investment adviser would have to comply with the Directive.

Commission’s final whistleblower rule incentivizes reporting first to compliance staff

Friday, May 27th, 2011

According to an article in IA Watch, the SEC commissioners voted to approve a final rule that extended the SEC’s whistleblower program without including a mandate that whistleblowers first go through a firm’s compliance program.  The Commissioners voted 3-2 along party lines.

The final rule was not adopted entirely as proposed.  Unlike the proposal, the final rule includes incentive for whistleblowers to first go to compliance staff, as well as disincentives if the whistleblower tries to sabatoge the firm’s compliance efforts by undermining the compliance staff investigating the matter.

This new rule takes place 60 days after publication in the Federal Register.

Proposed Legislation Would Limit 401(k) Loans

Monday, May 23rd, 2011 reports that Senators Herb Kohl (D-WI) and Mike Enzi (R-WY) have proposed the Savings Enhancement by Alleviating Leakage in 401(k) Savings Act (SEAL), which would limit the number of loans that participants can take from their 401(k) to no more than three at a time.  Currently, an employee with an outstanding loan who loses their job must pay back the loan within 60 days. The SEAL Act would give them until their tax deadline for that year to repay the loan and allow them to deduct the early withdrawal penalty from the loan balance.

Further, while those who have an outstanding loan currently may not contribute to their 401(k) for six months, SEAL would lift that ban. And SEAL would ban the used of debit cards linked to 401(k) accounts. The article cites Aon Hewitt in a study that found 28% of 401(k) participants had an outstanding loan in 2010, up from 22% in 2005. The average loan was $7,860.

BridgePortfolio, RIA Back Office Provider, Sells to Insignis – Possible Trend?

Monday, May 23rd, 2011

On the heals of the Advent-Black Diamond deal, AdvisorOne reports that BridgePortfolio, an outsource provider of RIA back office functions, has announced that it will be acquired by Insignis, Inc., a national data aggregation company for the financial services industry. The companies currently service complementary segments of the market and believe the combined entity will take up a predominant position within the RIA back office and reporting space.

Advisors Still Taking Assets From Wirehouses: TD Ameritrade RIA Survey

Monday, May 23rd, 2011

As AdvisorOne reports, a recent TD Ameritrade survey indicates that advisors are increasingly optimistic about the growth potential of the RIA model, but nonetheless harbor concerns over regulatory and compliance issues. The survey further shows that traditional wirehouses continue to be largest source of new assets for RIAs and that advisors are becoming increasingly focused on investing in operating efficiencies, such as technology and reporting functions. A TD representative speaking on the study went on to say that much of the M&A activity in the advisor technology space – notably, the Advent acquisition of Black Diamond, which we reported on last week – is likely a direct reflection of the RIA model’s viability. Advisors’ new efforts to ramp of operational measures also illustrates the industry’s uneasiness over forthcoming regulatory mandates and increased compliance burdens.

FINRA Enforcement Activity, Fines Up So Far in ’11

Monday, May 23rd, 2011

According to a Reuters report, FINRA has brought more enforcement actions and levied higher fines against broker-dealers through April than in the same period over the last three years. As of April 30th, FINRA brought 449 cases and collected fines in excess of $14.5 million. Bradley Burnett, FINRA’s enforcement chief, said that the timing of the cases is cyclical and many of them are the product of investigations that commenced long before he took over the position earlier this year. Burnett also stated that FINRA is ramping up its efforts to crack down on issues surrounding customer privacy, improper fee assessments and other such compliance lapses.