Cox to Get Rand Recommendations by May 5

Debate ensues on whether to combine advisor, broker/dealer regulations

More On Legal & Compliance

from 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 RIA’s failure to stay within the scope of the Section 28(e) safe harbor may violate the advisor’s 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.
  • Best Practices for Working with Senior Investors Securities examiners deal harshly with RIAs that do not fulfill their fiduciary obligations toward senior investors, as the SEC and state securities regulators view older investors as particularly vulnerable and in need of protection.

The SEC's Director of Investment Management, Buddy Donahue, told a packed room at the Investment Adviser Association's (IAA) compliance conference in Washington March 21 that he and Eric Surri, director of the SEC's Trading and Markets division, will deliver to SEC Chairman Christopher Cox by May 5 steps the Commission should take in light of the recent findings of the Rand report.

While he would not divulge details about the recommendations, Donahue did say it was "enormously important for us to get it right."

The Rand report, which studied the broker/dealer and investment advisor regulatory schemes, found that while investors are confused about who's a broker and who's an advisor, they are nonetheless pleased with the services they get from their financial professional of choice.

The issue of whether to put advisors and B/Ds under one set of regulations is heating up. David Tittsworth, executive director of IAA, told conference goers there could be a "complete change of advisor regulation" as there's talk now of advisors being subject to B/D regs and vice versa. "FINRA is licking its chops," he said, at the idea of "becoming the SRO for advisors." But he argued the way advisors are regulated now is "pretty good," and should remain the same.

Reprints Discuss this story