SEC To Propose Audit Requirements for Investment Advisors, Possibly by Mid-May

Posted on April 23, 2009 by Regina Ori

On April 6th, SEC Chairwoman Schapiro told the Counsel of Institutional Investors that the Commission was looking into “many potential reforms” for market professionals and intermediaries, including brokers, advisors and credit rating agencies. Among the Commission’s early ideas, Schapiro added, were annual unannounced audit requirements for market professionals who directly hold client assets, in order to "confirm the safekeeping of those assets.”

The Wall Street Journal has now reported that the SEC plans to propose these audit rules, and other reforms for market professionals, possibly as soon as mid-May. Citing an SEC official “familiar with the matter,” the Wall Street Journal reports that the new rules, designed to safeguard customer assets, are tentatively scheduled to be proposed on May 14th.

The Wall Street Journal article is available here [log-in required]. A transcript of Chairwoman Schapiro’s address to the Counsel of Institutional Investors is available on the SEC’s website.

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FINRA Creates New Office of the Whistleblower

Posted on April 21, 2009 by Regina Ori

Recognizing the importance of investor complaints and insider tips in the current economic environment, the Financial Industry Regulatory Authority (FINRA) has established a new Office of the Whistleblower to be headed by FINRA Senior Vice President, Cameron Funkhouser. The Whistleblower Office is intended to expedite FINRA’s review of - and significantly - the response to, high-risk investor fraud tips. Indeed, some of FINRA’s most well-known enforcement actions have resulted from complaints or tip-offs, including a 2007 action against Citigroup Global Markets, a $5 million fine against Merrill Lynch in 2006, and a 2002 action against Credit Suisse First Boston.

In a press release issued on March 5th, FINRA’s Interim CEO, Stephen Luparello, stated that “[t]his new initiative will ensure that individuals with significant information will reach senior staff, who can quickly assess the level or risk involved and make sure that each tip is properly evaluated. Those tips warranting additional review and investigation will be subject to an expedited regulatory response.”

View the FINRA press release announcing the new Office of the Whistleblower, here.

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