More On Legal & Compliancefrom The Advisor's Professional Library
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
Phyllis Borzi, the new assistant secretary of labor and head of the Department of Labor's Employee Benefits Security Administration (EBSA) gave her first press interview since being confirmed during the summer.
Borzi made no mention of the HR 2989 bill pending in Congress that is specific in the fee disclosure requirements, according to Dalbar, a leading financial-services market research firm, and instead expressed goals that were identical to those underlying the bill.
By making no mention of HR 2989 in discussing participant advice, Borzi reinforced the presumption that passage of this bill is not expected, according to Dalbar.
"We're taking very seriously the comments that people made about the regulations going well beyond the scope of the statute," Borzi said.
As for target-date funds, given the sensitivity of Borzi as well as the Congress to "conflicts of interest on Wall Street," they are unlikely to escape without changes. And revisions to target-date fund regulations should be expected in early 2010, but failing that it will be 2011-- after the mid-term elections.
The new regulations will most likely affect fund naming, advertising and "fund of fund" restrictions. The restrictions are likely to be a "level fee" requirement that prohibits fee differences between automatically assigned (QDIA) investments, Dalbar notes.
The research group, which is based in Boston and led by Lou Harvey, also concludes that automatic IRAs will be part of the next pension legislation to pass Congress in early 2010 or, if not, in 2011.