While the overwhelming majority of registered investment advisers are operating in the best interest of their clients in a very complex business, others do not, according to the SEC.

 

These bad actors usually are either liars, cheaters, reckless or involved in conflicts of interest.  The former usually face the wrath of regulators sooner rather than later. However, the last group is most problematic.  Detecting and preventing conflicts of interest- either at the individual or firm level — are matters that make compliance officers’ jobs difficult if not impossible.  Compliance and risk management personnel must view these issues in perspective to achieve long term goals. 

 

The SEC will focus on the efforts made by firms to root out conflicts of interest and firms must do the same.  Unfortunately, it is not that simple, and, in many cases, there are no definitive guidelines.