More On Legal & Compliancefrom The Advisor's Professional Library
- Proxy Voting RIAs are not required to vote proxies on behalf of their clients. However, when an RIA does assume responsibility for voting proxies, the firm’s policies and procedures should help to ensure that votes are cast in the best interest of clients.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
The Senate Banking Committee approved Monday, March 22 the financial services overhaul bill by a vote of 13-10 (13 Democrats and 10 Republicans). An expected week-long mark-up schedule was cut short when Republican committee members decided over the prior weekend against submitting any amendments to Senate Banking Committee Chairman Christopher Dodd's bill.
Senator Herb Kohl's (D-Wisconsin) amendment to the financial services reform bill that would create an independent oversight board to regulate financial planners was not introduced as a separate amendment during mark-up of the bill on March 22. Rather, a manager's amendment to the bill included a provision calling for a GAO study of the issue.
After the bill passed, Kohl--who is chairman of the Senate Special Committee on Aging--released a statement thanking Dodd for including the GAO study provision, adding that in the Aging Committee, he has "looked at the use of certain financial advisor designations and the impact on elderly consumers. This study would not only help expose any gaps in state and federal regulations, but also look at the use of other designations that are being used to take advantage of consumers."
Dodd (D-Connecticut) was attempting to get his financial services reform bill, which he released on March 15, completed quickly, and therefore did not include controversial amendments that could isolate Republicans on the committee, sources say. Republican Senator Bob Corker (R-Tennessee) said in the early afternoon of March 22 that the Senate Banking Committee would likely approve the bill that day, with only Democratic votes. Corker said he envisions a full Senate vote after the two-week Easter break, which starts on March 26.
A GAO study of whether to regulate financial planners "makes sense," sources say, because House Financial Services Committee Chairman Barney Frank's financial services reform bill, the Wall Street Reform and Consumer Protection Act (H.R. 4173), which was passed last December, also calls for a similar study.
Groups like the Investment Adviser Association (IAA) opposed Kohl's amendment, arguing it would have placed more regulation on investment advisors who are already regulated and abide by a fiduciary standard. As for the GAO study, Neil Simon, VP for government relations at IAA, says "it is entirely appropriate to study whether financial planning should be regulated as a distinct financial service provider, and, if so, how it should be regulated." Clearly, he adds, "there have been abuses involving persons who are not regulated under state or federal law who, [unlike] investment advisors, are [not] subject to a fiduciary standard."