Monday, November 26, 2012

Schapiro resigns from SEC post

Effective December 14, 2012, Mary Shapiro will resign from the SEC. This does not come as any surprise, but the comments and opinions are certainly entertaining.

Elisse Walter has been appointed as Commissioner for the foreseeable future. Interestingly, Ms. Walter’s appointment does not require Congressional approval as she was previously confirmed as a commissioner by the Senate. However, as she has served before, it is likely that her tenure will be short. There is a desire to keep some continuity and Ms. Walter does have a record of similar voting, strategies and opinions as Ms. Shapiro.

Walter is likely to continue the push for FINRA as a self-regulatory organization over RIAs and a uniform fiduciary standard. We view this as the wrong decision for the RIA segment and ultimately for your clients.

AdvisorAssist will continue to monitor the activities in Washington. At this point, we expect the SEC to continue the path of increased exam frequency, visits to newer advisors and check-ups exams.

Friday, November 23, 2012

Retained Associates License

Hang a license?

FINRA recently proposed a new registration category called "Retained Associates" that would allow a currently registered person to retain their license for up to 10 years if they remain with the same firm.

While this would be useful for folks that assume operational roles, it has limited utility to the hybrid RIA, unless the RIA was also the owner of the broker-dealer.

This is also a complete 180 from FINRA's current rules that prevent the "hanging" of a license. In our opinion, this is just another move to help FINRA stay in the game.

We will continue to monitor this proposal and keep you informed.

The AdvisorAssist Team

Thursday, November 15, 2012

Massachusetts State Advisors: Compliance with Bonding Requirements for Advisers with Discretion Over Client Assets

Policy Statement Issued by Massachusetts Securities Division on November 14, 2012

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The Massachusetts Securities Division (the “Division”) would like to remind advisers that the Code of Massachusetts Regulations at 950 CMR 12.205(5)(a) requires that Massachusetts-registered investment advisers that have discretion over client accounts to be bonded in an amount not less than $10,000.00 by a bonding company qualified to do business in the Commonwealth.1

The Division generally takes the position that, for the purpose of this requirement, discretion means that the adviser has authority to execute buy or sell transactions for a client’s securities portfolio. An adviser can have such authority granted to it through, for example, advisory contracts, powers of attorney, trustee relationships, or an executed limited trading authority.

Advisers, on occasion, have a limited trading authorization form on file with a custodian for the convenience of their clients, but do not buy or sell securities without first authorizing each trade with the client prior to execution. In such cases, the adviser will not be subject to the bonding requirement of 950 CMR 12.205(5)(a) but only if:

  1. the adviser’s contract with the client explicitly states that the adviser does not have trading discretion;
  2. the adviser acquires permission or clears each and every trade prior to and on the same day that the adviser issues the order to buy or sell; and
  3. the adviser documents all such clearances in a written form, such as an e-mail or a log or journal and maintains such documentation for a period of five (5) years from the date of the transaction.
  4. During routine books and records examinations, examiners will be reviewing adviser’s practices to ensure compliance with these requirements.

1 This policy is applicable to Massachusetts advisers that are both registered with and located in Massachusetts. Advisers that maintain their principal office in another state and are registered there are subject to their home state’s books and records rules and bonding requirements.

AdvisorAssist Analysis:
Advisors that ARE located in Massachusetts have this bonding requirement. If you are registered in Massachusetts solely due to having more than 5 clients, you must follow your home state financial requirements and indicate to MA via your ADV1 that you are in compliance with your home state. SEC registered advisors do not have this requirement in MA.