From the June 2008 issue of Wealth Manager Web • Subscribe!

Beltway Blues

One of the undisputed benefits of possessing great wealth is that you control your life more than those less blessed. One of the undisputed roles of the wealth manager is to consistently over time provide your clients with more control than they already have. That's why it's important for you to stay current with recent court rulings, SEC and FINRA trends and legislation on the federal and even state levels that will affect the advice you give clients, and the issues you need to bring up with their legal and accounting advisors.

For instance, as we went to press, two members of the SEC staff--Andrew Donohue and Eric Surri--were scheduled on May 12 to present Commission Chairman Christopher Cox with their recommendations on how to implement the findings of the Rand Report on regulation of RIAs and stockbrokers, which Cox commissioned in the wake of the Financial Planning Association's legal victory last year voiding the so-called Merrill Lynch broker/dealer exemption rule. The Report, delivered at year-end 2007, found that investors were confused by the difference between advisors and stockbrokers, but that, paradoxically, those same investors were fairly happy with their current advisors.

In an April interview, Donohue wouldn't tip his hand as to the staff's recommendations, though he did say he thought it unlikely that there would be one set of regulations for RIAs and broker/dealers.

While those recommendations remained hidden, out in plain sight was another plan to redraw the regulatory landscape, the Blueprint for Regulatory Reform floated by Treasury Secretary Henry Paulson in reaction to the subprime mortgage mess and its continuing fallout. The Blueprint calls for increased federal oversight of the securities, banking and insurance sectors, and would establish a market stability regulator, a prudential regulator, and a business conduct regulator. Oh, and it suggests that FINRA become the SRO for RIAs. Since Paulson released his plan March 31, multiple Congressional hearings were being scheduled to address different parts of the plan. While cynics would question the timing of such a major initiative in the last year of a lame duck presidency, Duane Thompson, managing director of the FPA's Washington office, recalls that other major tectonic shifts in financial services, such as 1999's Gramm-Leach-Bliley Act erasing the restrictions of the 1933 Glass Steagall Act, took nearly 15 years to enact as it lurched its way through administrations both Republican and Democratic.

James J. Green, Editorial Director, can be reached at

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