Archive for December, 2012

Member Summit 2013 – Save the Date

Wednesday, December 19th, 2012

The following message was released and distributed to all clients and partners today.

The conversation continues…

December 11-13, 2013
Four Seasons Las Vegas

Las Vegas will once again be the place to be when MarketCounsel brings Member Summit 2013 to the Four Seasons Hotel in Las Vegas to continue the RIA Conversation.

Member Summit 2013 will elevate the experience of this annual gathering of the country’s preeminent investment advisers and their community to new levels with broader reach and expanded programming, delivered at an unparalleled venue. The industry’s best and brightest assemble only once a year at this perennial sold-out event. So, whether you’re joining us for your 6th straight year or making this your first, mark your calendars now and save the date.

Registration will open next month. But, for now, watch the videos below to get a sense for where we have been and where we are headed.

Video: The Member Summit Experience

Video: Four Seasons Hotel, Las Vegas

LinkedIn ‘Endorsements’ Can Now Be Easily Hidden

Wednesday, December 19th, 2012

Under the Investment Advisers Act, advisers are prohibited from publishing testimonials as part of advertising material.  A “testimonial” has generally been understood to include any endorsement or favorable statement of a client’s experience with the adviser.  While all of the issues surrounding testimonials and how they impact social media have not been fully addressed, there is ample evidence to conclude that the SEC and some state regulators would take the position that “endorsing” someone on LinkedIn may be tantamount to a testimonial and as such prohibited.

Now advisers will no longer have to constantly monitor profiles and scour email to see if someone has endorsed them.  Further, advisers will not need to manually turn off endorsements one by one.

To hide the endorsements you simply go to your Profile and select “Edit Profile,” then select the pencil icon and you will see an option labeled “Display your endorsements?” to which you respond ‘No’.  Once you save the settings and refresh your page, you should no longer be able to view endorsements.

 

While Elisse Walter Prepares to Become the Next Chairwoman of the SEC, Several Top Officials Depart

Tuesday, December 11th, 2012

Elisse Walter will face a host of challenges as she takes over for outgoing chairman Mary Schapiro.  Ms. Walter currently serves as an SEC commissioner and will not be immediately replaced; therefore, when she ascends to the chairmanship, she will find herself heading only a four-member commission, rather than the usual five members.

Not only will Ms. Walter be shorthanded in this regard, but several high-profile officials have announced their planned departures.  Most notably, Meredith Cross, director of the Division of Corporate Finance, Robert Cook, director of the Division of Trading and Markets, and Mark Cahn, general counsel have recently announced their departures.  These are all individuals that had significant roles during the much touted period of SEC “unprecedented enforcement and regulatory activity.”

Further exacerbating any uncertainty is just how long Ms. Walter will remain chairman. Her commission term runs through late 2013, thereafter, President Obama’s nomination, be it her or someone else, will require Senate confirmation.

SEC Sending Out Targeted Scope Examination Requests in the Wake of Hurricane Sandy

Tuesday, December 11th, 2012

The SEC has begun conducting examinations of certain investment advisers to assess the impact of Hurricane Sandy on the firms’ operations.  The examinations appear to be focused on a firm’s ability to conduct business in accordance with their Business Continuity Plan (“BCP”).

The SEC will seek documentation to assess the following:

  • Effectiveness of the BCP given the facts and circumstances surrounding the storm;
  • Applicability and usefulness of prior training provided to the firm’s personnel and prior testing of the BCP;
  • Effectiveness and adequacy of remote system access;
  • Location accessibility and services available, if any alternative operations sites were used; and
  • Interactions and any related issues with vendors, service providers and clients.

While these examination requests appear to be tailored specifically to address issues that were raised in the aftermath of Hurricane Sandy, they also reflect the concerns associated with an industry’s heightened reliance on technology and the need for backup systems and processes.

NASAA Fires Off Warning as Crowdfunding Accelerates

Monday, December 10th, 2012

Crowdfunding’s presence on the Internet has exploded in recent months, and the North American Securities Administrators Association (NASAA) sees a big potential for abuse.

Crowdfunding, which NASAA recently named as one of its top 10 investor threats, is an online money-raising strategy that began as a way for the public to donate small amounts of money, often through social networking websites, to help finance projects or cause.  The Jumpstart Our Business Startups (JOBS) Act will make it easier for small businesses and entrepreneurs to tap into the “crowd” in search of investments to finance their business ventures once the SEC adopts rules to do so.  The rules are expected sometime next year.

The chief counsel of the SEC’s Division of Corporation Finance, Thomas Kim, said in July that “crowdfunding is not yet legal until the commission appoints rules.” Violations are already occurring, however, as the Enforcement Section of the Massachusetts Securities Division on Aug. 9 brought an action against a Boston-based firm for crowdfunding-related violations.

MarketCounsel Featured in Industry White Papers

Wednesday, December 5th, 2012

MarketCounsel was recently interviewed and prominently featured in two recent industry partner white papers:

  • Gary Davis in ByAllAccounts’ How to Pass the Regulatory Exam: 6 Tips for Asset Management Operations
  • Dan Bernstein in Fidelity Investments’ Social Media and Advisors: Leveraging Online Communications Channels While Protecting Your Firm

Both white papers are available on the MarketCounsel.com public website Columns and Articles page.

Through ByAllAccounts and Fidelity Investments promotional efforts, these white papers will reach a wide audience and continue to position MarketCounsel as the leading business and regulatory compliance consulting firm to the country’s preeminent entrepreneurial, independent investment advisors.

Great work and kudos to Gary and Dan!

NAPFA to accept CFP designation only

Tuesday, December 4th, 2012

In a December 4, 2012 article from InvestmentNews, The National Association of Personal Financial Advisors (NAPFA) announced a new policy to only accept those advisors that have earned the CFP designation as members to the organization.

NAPFA’s national board indicated their decision was based on the need to support a single professional designation for the financial planning profession.   The board stated they felt consumers of the financial planning industry have been bombarded by advisors with an “alphabet soup” of designations.

NAPFA Chair Lauren Locker was quoted in the article stating “less confusion means more consumer confidence and the CFP designation hits the mark as a strong, baseline standard.”

SEC again warns of government impersonators

Tuesday, December 4th, 2012

The SEC Staff issued an updated Investor Alert because it stated it is aware of continuing fraudulent solicitations that claim to be affiliated with the SEC. Known scams include a fishing email claiming to be from Commissioner Daniel Gallagher.

The Alert makes it clear that the SEC does not contact individuals to:

  • seek assistance with a fund transfer;
  • forward investment offers to them;
  • advise them that they own certain securities;
  • telling them that they are eligible to receive disbursements from an investor claims fund or class action settlement; or
  • offer grants or other financial assistance (especially for an upfront fee).

While the alert is aimed at individuals, there are similar stories of impersonators gaining entrance into adviser’s offices to steal data.

FINRA may require disclosure to customers of broker recruiting incentives

Tuesday, December 4th, 2012

Investment News reported that FINRA is considering a rule change that would require disclosure to customers of broker recruiting incentives. “The Board will consider a proposed rule that would require disclosure to transferring customers of recruitment compensation packages offered to induce registered representatives to move from one firm to another,” FINRA said in a notice posted to its site on Wednesday about a board meeting that will take place next month.  Earlier this year, FINRA began reviewing conflicts of interest at 14 of the largest brokerage firms, reportedly focusing on broker compensation and recruiting arrangements.

In August 2009, after the brokerage industry ramped up recruiting bonuses to target disaffected wirehouse representatives, Securities and Exchange Commission Chairman Mary Schapiro sent a letter to securities firm chief executives that warned them to carefully supervise brokers for churning or unsuitable sales, given the financial incentives for brokers to meet production and asset targets found in recruitment packages.  Former SEC chairman Arthur Levitt, who ran the agency from 1993 to 2001, called for the disclosure of recruitment packages.  Responding to Mr. Levitt, FINRA in 1999 proposed a rule that would have required disclosure of accelerated payout arrangements for brokers who change firms. FINRA then known as the NASD, never acted on the proposal.

FINRA may require disclosure to customers of broker recruiting incentives

Tuesday, December 4th, 2012

Investment News reported that FINRA is considering a rule change that would require disclosure to customers of broker recruiting incentives. “The Board will consider a proposed rule that would require disclosure to transferring customers of recruitment compensation packages offered to induce registered representatives to move from one firm to another,” FINRA said in a notice posted to its site on Wednesday about a board meeting that will take place next month.  Earlier this year, FINRA began reviewing conflicts of interest at 14 of the largest brokerage firms, reportedly focusing on broker compensation and recruiting arrangements.

In August 2009, after the brokerage industry ramped up recruiting bonuses to target disaffected wirehouse representatives, Securities and Exchange Commission Chairman Mary Schapiro sent a letter to securities firm chief executives that warned them to carefully supervise brokers for churning or unsuitable sales, given the financial incentives for brokers to meet production and asset targets found in recruitment packages.  Former SEC chairman Arthur Levitt, who ran the agency from 1993 to 2001, called for the disclosure of recruitment packages.  Responding to Mr. Levitt, FINRA in 1999 proposed a rule that would have required disclosure of accelerated payout arrangements for brokers who change firms. FINRA then known as the NASD, never acted on the proposal.