More On Legal & Compliancefrom The Advisor's Professional Library
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
The House Financial Services Committee passed on August 3 the Terrorism Risk Insurance Revision and Extension Act of 2007 (H.R. 2761), which will extend the Terrorism Risk Insurance Act (TRIA) by 15 years and may help spur the further development of a private market for terrorism risk insurance.
After the attacks of 9/11, many insurance companies excluded terrorism events from their insurance policies. As a result, Congress passed TRIA in 2002 as a temporary three-year program, which created federal protection from against terrorism related losses. In 2005, the measure was extended to 2007, and will expire at the end of this year if no action is taken.
According to a House release announcing the extension of TRIA, while TRIA has kept terrorism insurance affordable, the most recent report by the President's Working Group on Financial Markets found that a private market for terrorism reinsurance in virtually nonexistent--especially with regard to nuclear, biological, chemical, and radiological acts.
Besides extending the Act for 15 years, H.R. 2761 would also change TRIA's definition to include domestic terrorism; set the program trigger at $50 million; add group life insurance to the lines of insurance for which terrorism coverage must be available; and decrease deductibles for terrorist attacks of more than $1 billion and decrease the trigger after such events.