Fiduciary Links: At 5-Year Mark of Lehman Bankruptcy, SEC Still Under Close Hill Scrutiny
Posted by Duane Thompson on September 16, 2013
>>>On September 15, 2008, Lehman Brothers filed for Chapter 11 protection from bankruptcy, triggering a financial meltdown and global crisis that reverberates today. As the news media reprises the five-year anniversary, it seems the SEC is ready to move on, although House Republicans don’t seem as ready.
For one thing, enforcement cases from the financial crisis are drying up due to the five-year statute of limitations clarified by the U.S. Supreme Court this February in Gabelli v. SEC. In the Court’s words, the “five-year clock…begins to tick when the fraud occurs, not when it is discovered.”
For another reason, at least for the SEC’s Division of Investment Management, the backlog of Dodd-Frank rules has abated; although others remain in the pipeline for federal regulators, such as the Volcker Rule, IM is done. In what may have been a coincidence, on the same day IM Division Director Norm Champ was talking to a crowd of hedge fund managers about plans to more closely monitor hedge fund activities, the House Committee on Financial Services wrote a strongly worded letter to SEC Chairman Mary Jo White suggesting the SEC back off from private fund examinations.
According to Committee Chairman Jeb Hensarling (R-Tex.), and Subcommittee Chair Scott Garrett (R-N.J.), the SEC has been sending conflicting signals on the role of private fund regulation, and whether funds pose systemic risk of the kind that caused the 2008 crisis. Instead, the Republican leaders not too delicately suggested the Commission would be better served stepping up its examination of retail investment advisers, many of whom “provide investment advice to investors who are often less sophisticated and have fewer resources to conduct due diligence” on the quality of the advice they receive.
The congressmen gave White eight days to respond. Hensarling’s committee recently passed a bill that would exempt a segment of the hedge fund advisors current registered with the SEC. Private fund advisors comprise nearly one quarter of all SEC-registered advisers, and manage $4.6 trillion in assets.
In the meantime, securities regulators are expanding their interest in titles used by financial advisors beyond those marketing specialized senior expertise. On September 11th, the SEC and state regulators released a bulletin warning investors to ask questions about their title and what the adviser had to do to obtain it. The “requirements for obtaining and using these titles vary widely, from rigorous to nothing at all,” the bulletin said.
Now on to the rest of the week's best links:
News and columns from the leading trade, consumer, and mainstream media:
- DOL delays fiduciary rule proposal...again [InvestmentNews]
- Adviser head count expected to drop amid lack of new recruits, Cerulli says. [InvestmentNews]
- Changes expected as FINRA weighs controversial broker-comp rule. [InvestmentNews]
- Clients dragging their feet on planning for net investment income tax [InvestmentNews]
- CFTC funding plan includes transaction costs for derivatives [InvestmentNews]
- Financial Planning Coalition hashes out definition of "fee-only" debate [InvestmentNews]
- National RIA brand a foolish idea, according to Focus Financial's Adolf says. [Financial Planning]
- Developing NextGen Advisors: the "osmosis approach. [Wealth Management]
From the organizations/associations/government/academia:
- The costs of remaining uninsured: navigating the affordable care act. [CFP Board]
- SEC Chair White releases a statement on meeting with leaders of exchanges. [SEC]
From the blogs:
- Trending topics for ERISA plan sponsors. [FiduciaryNews]
- One thought for advisors with stagnant practices: pick up the telephone! [RIABiz]
- Do the calculations: Are my retirement savings on track? [Do it Yourself Investing]
- In a new study financial executives address de-risking and ERISA benefit programs. [Pension Risk Matters]
- Sign up for an online Social Security account: make sure to check benefits statement annually. [Retirement 2.0, InvestmentNews blog]
Articles your clients are reading (or should be):
- Investing Basics: Do your investment fit your financial needs? [US News]
- How to test-drive your retirement - give it a try before your last day of work. [US News]
- Seven warning signs your retirement is in jeopardy. [US News]
- Five financial disasters to avoid. [US News]
- Don't settle for suitable financial advice - care if your financial advisor is a fiduciary. [The Chicago Financial Planner]
