Archive for September, 2011

AdvisorTV Series Launches

Wednesday, September 28th, 2011

Remember the film crew that took over the office for two days in June?  Well, after a long summer of waiting, it’s finally time to see the end result!

Source Media’s AdvisorTV program called   The first episode in the “5 Minutes with the Adviser’s Advisor” Source Media AdvisorTV series launched this week.  The first session, available on both Financial Planning Magazine’s and On Wall Street’s websites, has Brian interviewing Frank on what to consider when starting the process of going independent

Schwab / MarketCounsel White Paper Published

Wednesday, September 21st, 2011

A white paper written by MarketCounsel for Schwab Advisor Services entitled Legal and Regulatory Considerations: Navigating the Transition to Independence as an RIA was published this week.

A webinar to support the white paper with participation by BSH, DAB, CSK, and SMB (who were also the white paper contributors) was conducted on 9/20/11. An archive of the webinar will be posted shortly.

A press release announcement by Schwab Advisor Services sent over the wire provides more details and industry publications including Financial Planning, On Wall Street, Bank Investment Consultant have covered follow-up stories: Schwab Rolls Out Tools to Aid RIA Transition.

SEC and FINRA Investigating Firms Engaged in High-Frequency Trading

Wednesday, September 14th, 2011

OnWallStreet reports that the SEC is beginning a major examination into the operations of hedge fund companies and investment banks that engage in high-frequency trading. The SEC Office of Compliance, Inspections and Examinations (OCIE) has hired several experts to examine the practice of trading stocks using computer programs and algorithms. The SEC has requested proprietary data from trading companies, stating that “this is not a one-off examination. We are going to be taking a closer look into what risks are posed by this kind of trading activity.” Many firms have been or will be required to provide the technical information regarding their trading programs. FINRA is cooperating in the SEC effort, which was prompted by events like the Flash Crash of May 6, 2010, when the Dow Jones Industrial average plunged by more than 1,000 in a just a few minutes — in part because of computer programs that reacted –or overreacted — to one large market order by one trading firm. Both FINRA and the SEC are “asking” firms that engage in computer trading to provide them with their algorithms, computer codes and trading strategies, information that these companies zealously guard as trade secrets.

Although the requests by the SEC seek voluntary compliance, agency examinations are part of the SEC’s mandate and its “requests” actually are more like demands. If rejected, examiners have the ability to subpoena the information. The SEC asserts that it is handling such proprietary information with significant security precautions. Both FINRA and the SEC stress that they are not investigating any wrongdoing in their examination process, but are concerned about the increasing use of computerized, high-frequency trading, and its impact on the operation of markets.  In addition, the agencies seek an understanding as to how the system could be gamed. A big concern is whether traders have the ability to orchestrate a flash crash or sudden market rise.

Financial Services Institute Hails New CA Independent Contractor Legislation

Wednesday, September 14th, 2011

The California legislature has passed a bill that tightens rules governing independent contractor status and is generally considered a positive development for independent broker/dealers and their advisors.  The Financial Services Institute, the IBD trade group, supports the legislation, which prohibits the “willful misclassification” of independent contractors who instead qualify as employees.  The FSI initially tried and failed to get an exemption for the independent broker-dealer industry into the bill, but it did manage to convince the sponsor to remove onerous record-keeping and “notice” requirements, citing increased compliance burdens and costs for financial firms.  Independent contractor status in the IBD channel and RIA channels are pretty well-established.

Financial services firms in particular have difficulty with the independent contractor issue because, according to the IRS definition, many independent representatives still fall into the employee category when in practice, they are truly independent contractors.  In California, at least, the amended legislation is viewed as eliminating the gray area for “misclassifying”  employee or contractor status.   Pursuant to the new legislation, any company found to have violated the law by engaging in willful misclassification of independent contractors will have to post a “notice” on its website or in its office so that employees can see it. If applicable, the notice must say that the employer has violated the law, that the firm has changed its business practices to avoid committing further violations, and that employees who feel they are being misclassified should contact the Division of Labor Standards Enforcement, the Employment Development Department, or the Franchise Tax Board.