More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
A federal appeals court has ruled in favor of the Financial Planning Association in its suit to overturn the SEC exemption from fiduciary responsibility for broker/dealer reps known as the "Merrill Lynch rule." In a statement following the ruling, the FPA characterized the decision as a victory for consumers and urged the SEC not to take the case to the next level--the U.S. Supreme Court.
"Finally, there is hope that the consumer will be able to cut through the thick fog of confusion shrouding their financial advisor," said FPA Chair Dan Moisand, in the statement. "This ruling means the Securities and Exchange Commission can bring clarity to the financial services marketplace," Moisand added.
The appellate court ruling concludes a lawsuit filed by FPA against the SEC in July 2004. FPA also urged the SEC to limit an expected transition rule for the estimated $300 billion in fee-based accounts to three months. FPA President Nick Nicolette noted that the SEC had extended the effective date of the original rule to nine months, due to the need to adjust to a new regulation.
FPA said its attorneys successfully argued in court that the SEC cannot rewrite the protections Congress adopted in a way that would have allowed brokers to offer the same advisory services as registered investment advisors without requiring brokers to put their client's interests first.
The ruling of the U.S. Court of Appeals for the District of Columbia Circuit and the legal briefs filed in the case can be reviewed online at: www.FPAnet.org/member/govt_relation/lawsuit-against-sec-broker-dealer-rule.cfm