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Compliance Responsibilities of the Chief Investment Officer

This might seem intuitive, but is not always the case. Depending upon your investment management division’s interaction with the compliance team, responsibilities may only be published in a compliance manual and sitting on a shelf. In many cases not only was it not read, but may not even be locatable. Bottom line: the CIO and/or the firm’s investment committee are responsible for more than the selection and execution on investments and portfolio design. Depending upon the firm’s structure, some responsibilities may be delegated to other groups. For instance, the investment committee and CIO need to be aware of SEC Rule 28(e):

SEC Interpretive:

We are publishing interpretive guidance on the application of Section 28(e) of the Securities Exchange Act of 1934 (“Exchange Act”). This section provides a safe harbor to money managers who use the commission dollars of their advised accounts to obtain research and brokerage services. The guidance we are publishing today clarifies that the term “commission” for purposes of the Section 28(e) safe harbor encompasses, among other things, certain transaction costs, even if not denominated a “commission.”

The advisor needs to be careful here in order to not jeopardize his/her fiduciary duty. The commission/fees paid to the broker-dealer must be reasonable relative to the “research and brokerage services” being provided to the advisor.

Regulatory Maven is designed to work with you on all aspects of your business. Our team of experts works with you on understanding your compliance requirements and adopting procedures which fit your model and resources while designing a program to maintain compliance. We are here to assist – call us at 603.965.7791 or email to:

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