More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Financial advisors would be overseen by the Obama Administration's proposed Consumer Financial Protection Agency (CFPA) legislation, which the Treasury Department sent to Congress June 30. Under the proposed legislation, financial advisors under the CFPA's purview would include those who provide "financial and other related advisory services; educational courses and materials on financial matters; or credit counseling, tax-planning, or tax-preparation services."
Dan Barry, director of government relations at the Financial Planning Association, says the FPA is currently reviewing the Administration's CFPA proposal. The proposal does include a pretty clear exclusion for broker/dealers and investment advisors registered with the SEC, Barry says.
However, the FPA wonders how the proposed CFPA would affect the Financial Planning Coalition's proposal to have a professional oversight body oversee financial planners. He says that right now, Coalition members--which includes the FPA, NAPFA, and the CFP Board--are talking about the professional oversight body idea with members of Congress. "We're getting some traction," on the idea, he says.
It looks as though annuities will remain under the purview of the Securities and Exchange Commission, as will mutual funds. Life insurance and long-term care insurance will also be exempt from CFPA oversight.