More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Leaders of seven organizations representing financial professionals, regulators, and investors sent a joint letter on July 14 to Reps. Barney Frank (D-Massachusetts) and Spencer Bachus (R-Alabama) as chair and ranking member of the House Committee on Financial Services voicing their support for the proposal in the Obama Administration's White Paper on financial regulatory reform that would impose a fiduciary duty to act in their clients' best interests on anyone who provides investment advice.
"This represents a broad range of interests," explained David Tittsworth, executive director of the Investment Adviser Association (IAA) and one of the signatories to the letter. "You've got state securities regulators, which in and of itself is 50 states, plus territories, the little SECs if you will; two consumer groups; the coalition of financial planning groups; and then our organization which represents SEC-registered advisors. I think just the fact that you've got this broad range of regulators, consumer groups, and industry groups is something significant."
The joint letter refers to Section 913 of the proposed legislation which "authorizes but does not require the SEC to issue rules under the Securities Exchange Act of 1934 and the Advisers Act" that provide standards of conduct in providing investment advice.
While the groups offered support in principal for the proposal, the letter from the Certified Financial Planner Board of Standards, the Consumer Federation of America, the Financial Planning Association, Fund Democracy, the IAA, the National Association of Personal Financial Advisors, and the North American Securities Administrators Association noted that the legislation may fall short of reaching its stated goal unless revisions are made to "unambiguously provide for the extension of the overarching fiduciary duty that investment advisers owe their clients under the Advisers Act to brokers and others who provide investment advice, that this fiduciary duty is explicitly recognized in law, and that the legislation does not in any way undermine the fiduciary duty that already exists under the Advisers Act."
"It's just common sense to raise the bar and embrace a fiduciary standard of care for all those who deliver financial advice," Marv Tuttle, FPA's Executive Director and CEO told Investment Advisor."It's imperative that clients know that the financial advice they receive is in their best interest, regardless of whether it comes from an investment adviser or broker. We're looking forward to working with Congress to make sure we achieve that goal, while eliminating the current regulatory gaps."
"Consumers deserve the tools to make sound financial decisions. Just like selecting a doctor, consumers should be able to clearly identify competent and ethical financial planners and advisors - who are bound by a code of professional conduct to put their interests first and foremost," said Marilyn Capelli Dimitroff, chair of CFP Board's Board of Directors in a prepared statement. "Our goal is to have all financial intermediaries who offer financial advice subjected to the high standards of a fiduciary."
The letter was also sent simultaneously to SEC Chair Mary Schapiro and Treasury Secretary Timothy Geithner.