More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Independent broker/dealers and investment advisors lobbied members of Congress with a three-pronged message during the Financial Services Institute's (FSI) Public Policy Day in Washington September 13. FSI members hammered home to lawmakers that more than ever, Americans need financial advice and advisors and broker/dealers are best suited to provide it; independent advisors and some broker/dealers are small businesses and their ability to service their clients is jeopardized by burdensome regulations; and last, but certainly not least, Congress should support H.R. 4618, the Compliance, Inspections and Examinations Restructuring Act of 2005. FSI members told lawmakers they support H.R. 4618--which was introduced by Rep. Vito Fossella (R-New York) in December 2005--because it would require the SEC, in FSI's words, to "make important changes to its examination and enforcement processes, resulting in more effective regulation without piling on more burdens, particularly for independent advisors."
Before taking their messages to the Hill, FSI members got to hear what's on the mind of regulators these days. SEC Commissioner Annette Nazareth was on hand to tell FSI members that the SEC will continue to focus on three troublesome areas--inappropriate sales of variable annuities, suitability issues surrounding 529 college savings plans, and sales of "complex" products to seniors. James Ropp, the Delaware Securities Commissioner, told attendees that the states, too, are scrutinizing the sales of complex products to seniors, mentioning in particular sales of equity-indexed annuities. "From what I've seen," he said, "every contract is different," noting differences in terms and participation rates.
In the area of taxes, Robert Carroll, Deputy Assistant Secretary of the Treasury, who works in the Office of Tax Policy, told FSI members that Treasury continues to work on tax reform. He noted specific areas that are motivating Treasury to revamp the tax code. The tax system is too complex, he said, and creates compliance burdens. He cited IRS data which found that consumers spend $140 billion per year to pay for taxes--that includes getting help to understand the tax system as well as paying for tax preparation services. The "poster child" of tax reform is the Alternative Minimum Tax (AMT), Carroll said, "Which is a good example of a government program gone astray." Yet another motivator for tax reform, he said, is the "economic drag that taxes place on the economy."
Washington Bureau Chief Melanie Waddell can be reached at firstname.lastname@example.org.