More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
Addressing the Investment Company Institute's (ICI) 52nd annual membership meeting in Washington on May 5, Paul Schott Stevens, ICI's president and CEO, told attendees that the "landmark [financial reform] legislation will affect everyone in this room--as a consumer, as a saver, as an investor, not to mention as a financial services professional." The bill that ultimately passes, Schott Stevens continued, "will shape U.S. financial markets and influence our ability to compete in global markets. It will have a heavy bearing on how the American economy fares for decades to come."
Schott Stevens noted that the "thrust" of the reform bill has not been aimed at mutual funds or other registered investment companies. Rather, much of the legislation's emphasis, he said, is on controlling systemic risks.
Mutual funds, he said, have successfully "made the case that mutual funds do not pose broad risks for the financial system at large. As a result, our comprehensive system of regulation and oversight will remain largely unchanged and in the hands of the Securities and Exchange Commission." Noting that some in the fund industry have referred to "fiduciary" as "the 'F' word," Schott Stevens declared that "Those of us in the fund industry are fiduciaries--whether as advisors to a fund or directors on a fund board."
But others in the fund industry aren't so convinced that putting all types of advisors under a fiduciary mandate is a good idea. John Walters, president and COO of Hartford Life, noted on a panel discussion that requiring all advisors to adhere to a fiduciary duty would be a "huge change" that would ultimately be "damaging" to the industry.
Bridget Macaskill, president and CEO of First Eagle Investment Management, noted on the same panel that such a broad fiduciary edict would "lead to unintended consequences." Congress should move slowly in considering such a fiduciary measure, she added, because the "disruption to [mutual fund] distribution would be huge."