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NSCP's membership is drawn principally fromtraditional broker-dealers, investment advisers, bank and insurance affiliated firms, as well as the law fums, accounting firms, and consultants that serve them. The vast majority of NSCP members are compliance and legal personnel, and the asset management members of NSCP span a wide spectrum of firms, including employees from the largest brokerage and investment advisory firms to those operations with only a handful of employees. The diversity of our membership allows the NSCP to represent a large variety of perspectives in the financial servicesindustry.

The NSCP strongly supports the Commission's effortsto enhance and strengthen business standards and reinforce fiduciary standards associated with personal securities transactions by advisers and their employees. However, NSCP is concernedthat the scope and requirements of the Proposed Rule and Rule 17j-1be as nearly co-extensive as possible to avoid duplication, confusion, and regulatory gaps. In addition,NSCP is concerned that certain technical aspects of the Proposed Rule would interferewith legitimate business practices of advisers. 1. Standards of Conduct, Compliancewith Laws, and Personal TradingProcedures

Release 2209 proposes that all advisers registered with the Commissionadopt a code of ethics that, at a minimum, reflects the fiduciary obligations of the adviser and its employees, requires compliance with applicable federal securitieslaws, includes provisions reasonably designed to prevent inappropriate accessto material nonpublic information, and imposes certain limitations on personal trading by advisers' access persons.3 The Commissionhas asked for comment on the elements that should be included by advisers in their standards for business conduct. The Commissionhas also asked for comment concerningthe inclusion in the Proposed Rule of certain "best practices" relating to personal trading activities.

NSCP believes that standards of business conduct are most effective as positive statements of the firm's ethical culture. As such, they should be broad, and should neither dwell on nor be limited to specificapplicable legal requirements. Although laws and regulations establish minimum standards, ethical principles support a higher and differenttype of behavior - the "punctilio of honor" that fiduciary obligationsare based upon5The experience of NSCP9s members frequently shows that, to be effective, such statements must be addressed to the actual business context of individual f m s . Accordingly,NSCP does not support the adoption of a specific standard of conduct for all codes. Indeed, NSCP believes that any such standard would amountto a mere formalism and lack substantive value.

On the other hand, NSCP does not believe that standards of business conduct should be narrowly confined to a specificaspect of business practice. As stated above, standards of business conduct should be broad statements of a firm's approach to doing business. As a result, NSCP supports a requirement that adviser's codes of ethics address all applicable laws and regulations.

Similarly, while it encourages advisory firms to include a broad array of controls and procedures for monitoring the personal securitiestransactions of employees,NSCP does not support the inclusion of any specificprocedures in the Proposed Rule. Advisers should select an appropriate matrix of such controls, and should develop specific implementationrequirements (such as timing, coverage areas, and any appropriate exemptions). However, both the controls

Release 2209, Proposed Rule § 275.204A-l(a). Such practices include, for example, pre-clearance of transactions,blackout periods, holding periods and receipt of duplicatebrokerageconfirmations.Cite to text accompanyingnotes 23-27. Cardozo, J., Meinhardv. Salmon, 249 N.Y. 458 at 464, 164N.E. 545 at 546 (1928). 4 5

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