Transcript Title of PPT Goes Here

PROCU 2012 ANNUAL MEETING
REGULATORY UPDATE
Michael D. Burns
Chief Compliance Officer
October 1, 2012
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Topics For Discussion
• Where has Dodd-Frank Led us to Today
• SEC Activities and Status
• Investment Adviser Regulatory Overhaul
• Financial Industry Regulatory Authority (FINRA) Focus
• Department of Labor Fiduciary Focus on ERISA
• Regulatory Environment
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Dodd-Frank Wall Street Reform and
Consumer Protection Act
Set Regulatory Framework for Managing Systemic Risk: Financial
Stability Oversight Council (FSOC)
Over the Counter Derivatives are Subject to CFTC and SEC Regulatory
Rules
Establishes a Bureau of Consumer Financial Protection (CFPB)
Federal Insurance Office (FIO) Created to Monitor and Report on the
U.S. Insurance Industry
Office of Credit Ratings (OCR) within the SEC
Mortgage Reform and Anti-Predatory Lending Standards are
Addressed
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Dodd-Frank Wall Street Reform and
Consumer Protection Act
BY THE NUMBERS
Rulemakings
Studies
Systemic Risk & Resolution Authority
42
27
Bank Regulation
14
6
Private Funds
11
5
140
10
Payment, Settlement & Clearing
8
1
Investor Protection
12
29
Securitization
12
2
Credit Rating Agencies
14
8
Executive Compensation & Corporate Governance
8
1
Municipal Securities
2
3
Consumer Financial Protection
21
24
Mortgage Reform
24
8
Federal Insurance Office
2
5
Federal Reserve System & Emergency Authorities
1
5
Miscellaneous
4
11
315
145
OTC Derivatives
Total
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Dodd-Frank Act: Investment Adviser Changes
SEC Registration requirements Changed from $30 Million to $100
Million
Advisers to Private Funds will Generally be Required to Register with
the SEC if the Adviser has Assets Under Management of $100
Million or More
Municipal Securities Rule revisions will require SEC registration of
Advisers when meeting the definition of a “municipal advisor” and
giving advice to or on behalf of a municipal entity or obligated party
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SEC Priorities and Status
• RIA Regulatory Changes
• SIPC Expansion
• Money Market Reform
• Regulatory Environment – Supervision of
Registered Investment Advisers
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Investment Adviser Changes
• Required RIA firms to deliver to their clients a narrative brochure
written in plain English (ADV Part II) – Update by next required
ADV Update
• Part 2A –firm brochure that contains many of the items
previously required to be disclosed in the ADV Part II.
• Part 2B –IAR supplement to the Part 2A brochure. The
brochure supplement will contain information regarding the
educational background, business experience, and disciplinary
history (if any) of the IAR.
• Forms are to be updated upon any material event and must be
provided in accordance with delivery requirements
• Expanded custody rules were adopted which include audits of
securities holdings
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FINRA Regulatory Focus
• Suitability Rule overhaul became effective July 1, 2012
• Expanded information to be maintained and evaluated
• Introduced “Hold” recommendations
• Positioning itself as Self Regulator for Registered Investment
Advisers
• Revenue enhancements through fee increases
• Focus on complex product disclosure and training, sales to
seniors, expanded public disclosure of disciplinary history and
firm reporting of information for expanded oversight and
transparency.
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FINRA Regulatory Exam Priorities
2012 Exam Priorities
• Business Conduct & Sales Practice Concerns
o Heightened supervision of complex products
o Suitability Reviews (Rules 2111 & 2090)
• Microcap Fraud
• Private Securities Transactions & Outside Business Activities
• Social Media & Electronic Communications
• Cyber Security
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Department of Labor ERISA
Fiduciary Focus
• ERISA applies to both defined Contribution and Defined
Benefit Plans
• Rule 408(b)(2) Plan disclosures required July 1, 2012
• Rule 404(a)(5) Participant Disclosures required August 31,
2012
• DOL withdrew proposal to expand fiduciary definition to
cover SEPs, SIMPLEs and IRAs pending a cost/benefit
analysis and further review
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Regulatory Enforcement and Economic Impact
• Identification of experienced candidates with no disclosures are
becoming much more challenging
• Disclosures are resulting from more than sales practices issues:
credit considerations, aggressive litigation and more complex
products
• Regulatory focus on consumer protection as well as volatile
markets have resulted in increasing disclosures for both firms and
advisors
• The economic environment, combined with the real estate market,
have resulted in more disclosure than ever on credit concerns
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Discussions
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