Enforcement Actions Against Investment Advisors Have Doubled Since 2009

Friday, November 11, 2011 08:31
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Enforcement Actions Against Investment Advisors Have Doubled Since 2009

Tags: sec

The growth of the advisory business and the new sense of activism at the SEC have had their downside as well as their benefits for the RIA channel.

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On the one hand, the more RIAs that form and successfully court clients away from the wirehouse, the better.

 

And the more active the regulators are in prosecuting bad actors in the markets, the safer everyone is. Retail investors are better protected and good-faith competitors can prosper.

 

But a bigger RIA universe is a bigger target, and in the post-Madoff world, a more aggressive SEC is more willing to investigate anything that looks unusual.

 

That's why the SEC logged a record 146 RIA enforcement actions so far this year: 30% more than in the entirety of 2010 and close to double its activity in 2009.

 

Broker-dealers also felt the heat -- enforcement surged 60% over last year -- but at this point, there just aren't nearly as many brokerage firms left to investigate.

 

Any growing industry will have growing pains. That growth will attract less-than-perfect people, and as long as they attract discipline when they screw things up for everyone, it's a net positive.

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