The SEC has Published FAQs Regarding the Switch of Investment Advisers From SEC to State

The U.S. Securities and Exchange Commission (“SEC”) has posted a webpage with frequently asked questions regarding the switch of investment advisers with less than $100 million of assets under management from the SEC to state securities regulator(s). Click here to go to the SEC “FAQ” webpage.

There are only a five questions posted so far, however some of it is valuable new information. One new tidbit of information is that only RIAs located in New York and Wyoming will be required to remain registered with the SEC and will not be affected by the switch. In earlier communications it was hinted that Minnesota would be included on this list, but this is no longer the case. In addition, at the bottom of this webpage is a link to the new amended Form ADV Part 1 which is being revised to include the new investment adviser registration requirements. The new questions on the Part I will have to be answered by all investment advisors, not just the ones involved in the switch. The SEC expects this new form to be available electronically through IARD by January 1, 2012. Click here to view a copy of the amended Form ADV Part 1, here to view the instructions for filling out the amended Part 1 Appendix A and here for Appendix B.

Hopefully more questions and answers will be added in the future.

The Department of Labor - Proposed Fiduciary Definition

The Department of Labor (DOL) has proposed changes to the fiduciary definition under the Employee Retirement Income Security Act. This change has far-reaching implications for your retirement plan and individual retirement account (IRA) businesses and represents a significant adverse effect on individual investors and retirement savings.

Voting Proxies

An actively involved and voting shareholder constituency is the cornerstone to effective corporate governance. The powers vested in the shareholders to select board members by vote helps to ensure that the board members run the corporation for the benefit of the shareholders and those conflicts of interest inherent in management of the corporation by the officers and board members are mitigated to the fullest possible extent.

With the advent of Modern Portfolio Theory and Active Management, the majority of investors retain professional managers and advisers to select and implement investment strategies to help maximize return and minimize risk; nevertheless, investors are not always aware that they retain their proxy voting responsibilities or they assume that their professional managers will vote proxies on their behalf. While investors may provide their managers and advisers the discretion to vote proxies on their behalf, the process in and of itself can create conflicts of interest as the interests of the manager and/or advisor may not always be aligned with the interests of the shareholders.