The SEC is moving to correct gaps in the oversight of advisors that allow bad actors to slip through the cracks.
In remarks today at the Practicing Law Institute's 49th Annual Institute on Securities Regulation, SEC Chairman Jay Clayton said the commission is creating a searchable database of individuals who have been barred or suspended as a result of federal securities law violations.
"This resource is intended to make the prior actions of repeat offenders and fraudsters more visible to investors,” he said.
The new database aims to capture individuals working in the securities industry who are not registered, addressing a major loophole in the regulatory system. Clayton touted it as being particularly valuable when "bad actors shift from the registered space for investment advisors and broker-dealers to the unregistered space."
"It does plug a gap," said Jay Lippman, managing director at regulatory compliance firm Exiger.
Lippman viewed the database as "a good development with respect to investor protection" as many individuals involved in investment scams are neither registered with FINRA nor the SEC.
Industry regulators have long been criticized for not being able to catch individuals who are sanctioned as broker-dealers by FINRA but are nevertheless able to set up shop as registered investment advisors under the SEC's jurisdiction.
"It's an acknowledgement from Jay Clayton that these channel-hopping bad advisors are an issue, but it doesn't do anything substantive to try to rectify it," said Andrew Stoltmann, president of the Public Investors Arbitration Bar Association.
Stoltmann added that it would be helpful if regulators forwarded a coordinated response to keep a bad actor out of all channels that financial professionals operate in. He, nevertheless, acknowledged the SEC's move as a way to grab "low-hanging fruit."
"It's an inexpensive, commonsense step to try to help investors avoid really bad guys," he said.
Register or login for access to this item and much more
All Bank Investment Consultant content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access