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.
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
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