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SEC Investment Advisory Priorities For 2007
Andrew Donohue,
Director of the Investment Management Division of the SEC, was the
keynote speaker at IA Week's recent 6th Annual Fall Conference in
New York. Mr. Donohue addressed the key priorities for the Division
for 2007. Included in the list of regulatory priorities for the
SEC were the following:
The Investment
Adviser/Broker Dealer Study
The study is important because it will allow the SEC the ability
"to make fully informed evaluations regarding the broker dealer
and investment advisory regulatory schemes and how those schemes
affect both firms and investors." As a result, it will have
a significant impact on the future structure of the interrelationship
to customers of investment advisory and brokerage firms.
Books and
Records Rule
It was noted the investment adviser rule was adopted in the early
1960's and unfortunately the rule has not kept up with industry
changes. To this end, Mr. Donohue stated the industry is in great
need of reform to make its requirements meaningful in the 21st century.
As a result, the SEC is implementing a comprehensive review of the
books and records requirements.
ADV Part 2
The Division intends to work with state regulators on developing
a new ADV Part 2. Ultimately, the SEC believes the ADV Part 2 serves
a critical and important purpose by informing investors about material
conflicts. As a result, the SEC is working on a re-proposal recommendation
regarding this issue.
Soft Dollar, Portfolio Trade Practices and Best Execution
Due to requests for additional soft dollar guidance, the SEC intends
to provide a "second step" of guidance by year end to
supplement the recent interpretive guidance on soft dollars. The
guidance should enable mutual fund boards, and others in the advisory
industry, to have more focused dialogue with fund managers regarding
soft dollar practices, brokerage and trade allocation.
Hedge Funds
It is
clear the SEC has not rolled over on this issue. It is anticipated
the SEC will recommend a new anti-fraud rule under the Advisers
Act of 1940 that would have the effect of "looking through"
a hedge fund to investors.
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