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A Future Full of Challenges

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Ten years and 100 columns! It's hard to believe that this is my 100th "Compliance" piece for On Wall Street. I began writing this column, originally titled "Dear Advocate," back in July 2002. For the first three years it ran every other month. But in April 2005, the good folks at On Wall Street (recognizing my brilliance, no doubt) asked if I'd do it every month. So, this time I thought I'd do something a little different.

In looking back over the last ten years, I see that, although the readers keep coming up with new questions, the themes remain the same: lawsuits from disgruntled clients; cleaning up CRD records; employment disputes; and, of course, clarifying ever-changing laws, rules and regulations.

When I first began this column, we were struggling to come out of a historic bear market. Ten years later, we're struggling once again to deal with the aftermath of an even larger downturn. Back then, we were nine months into the war in Afghanistan and eight months away from invading Iraq.

As the saying goes: "The more things change, the more they stay the same." Markets rise and fall. Scandals come and go. The industry moves on to the next big thing, and the regulators come up with new rules to close the barn door after the horse is long gone, leaving it to the lawyers and compliance personnel to figure out what it all means. The changes that the industry, the country and, indeed the world have gone through over the last decade make me think of the old Chinese curse: May you live in interesting times.

So what does the future hold? Well, if I had the proverbial crystal ball I'd be lying on a tropical beach somewhere counting my millions. Unfortunately, when it comes to prognostication, we're all in the same boat. I do, however, have a few observations.

As we approach another presidential election, it's interesting to note the calls for repeal of the Dodd-Frank Act amid claims that its increased regulation is "killing jobs." Regardless of which side of the political aisle you come down on, however, what's missing from the debate is the fact that all Dodd-Frank did was issue instructions to the U.S. Securities and Exchange Commission to create new rules to address various issues. The SEC, under its existing rulemaking authority, created those rules. Therefore, repeal of Dodd-Frank won't make them suddenly disappear. My point here is that you shouldn't be fooled into thinking that repealing the act will be a panacea.

And speaking of Dodd-Frank, the other issue foremost in the minds of many advisors is the increase in regulatory assets under management needed to remain SEC-registered. For roughly 3,000 registered investment advisors this means transitioning from SEC registration to state registration. I find it interesting that many of the same people who rail against federal regulation and push a states rights agenda now find themselves wishing they could remain SEC-registered. As the saying goes: Be careful what you wish for.

From social media to regulation of private fund advisors; and from new exam requirements for credit rating agencies to stricter oversight of assets under management, the future holds many new challenges for everyone in every facet of the securities industry. I anticipate many new and interesting questions.

I'd like to thank the editors at On Wall Street. But most of all, I'd like to thank you, the readers, who write in each month. Without you, there would be no column. As long as you keep asking questions, I'll keep answering them.

I will leave you with a quote from one of my favorite authors, Douglas Adams, who wrote Last Chance to See, about looking for some of the world's rarest and most endangered animals. I think it is very apropos of the securities industry: "Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so."


Alan J. Foxman is an attorney in private practice in Boca Raton, Fla.
He also works as an independent contractor with National Compliance Services
Inc. in Delray Beach, Fla. He can be contacted at
this email address.


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