More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
Advisors are of one mind in their concern over regulation, but they're of several different minds when it comes to a level playing field for a fiduciary standard. Those are some of the key findings of a recent telephone survey of 503 RIAs conducted in mid-May by Maritz Inc. on behalf of TD Ameritrade Institutional (not all respondents custody with TD Ameritrade).
Not surprisingly as the Obama Administration, Congress, and regulators are floating ideas for major reform of financial services regulation, the survey found that regulatory changes and the macro-economic environment were respondents' top concerns (34% and 31%), along with profitability (27%). Also not surprising for RIAs, two-thirds of respondents said they'd like to see a fiduciary standard applied to brokers, but there was wide disagreement on what that standard should be: 36% said the current RIA standard should be applied to registered representatives; 29% said SIFMA's proposed Principles of Fair Dealing should be applied, and 25% said the current suitability standard for brokers should be maintained.
Assuming that there will be a financial impact on their businesses from re-regulation, 44% of respondents said they would either absorb the added costs themselves or pass on some of those costs to their clients.
In an interview, TD Ameritrade President Tom Bradley said that while "you can't be a salesperson and a fiduciary," there's room for both a suitability standard and a fiduciary standard, but "with a hard line between the two." After all, he said, a client who was a "prudent person" and was asked to choose between the two "would probably choose the fiduciary."