More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
An amendment put forth by Senator Patty Murray (D-Washington) to Senator Christopher Dodd's (D-Connecticut) financial services reform bill, which would include a state securities regulator on the Financial Stability Oversight Council (FSOC), is getting support from Senator Susan Collins (R-Maine) and Dodd.
But the North American Securities Administrators Association (NASAA) and the Consumer Federation of America (CFA) are up in arms over an amendment to Dodd's bill introduced last week by Collins that would water down the fiduciary standard by extending a fiduciary duty to brokers, but exempting those that sell variable annuities.
Barbara Roper, director of investor protection for the CFA, said in a statement after the Collins fiduciary amendment was filed, that "This amendment removes the fiduciary duty precisely where it is needed most-where the conflicts of interest are greatest, the investors are least sophisticated, and the sales practices are most abusive. It paints a target on the backs of senior Americans who are most likely to be targeted with abusive variable annuity sales practices."
NASAA President and Texas Securities Commissioner Denise Voigt Crawford sent a letter to each member of the U.S. Senate urging support for Murray's amendment, which would put a state securities member on the nine-member FSOC council. "While the bill proposes this essential Financial Stability Oversight Council, representatives of state securities administrators, state insurance commissioners, and state banking supervisors have not been included as members of the Council," Voigt Crawford wrote. "A state securities regulator would bring to the Oversight Council the insights of a team of 'first responders' who see trends developing at the state level, which have the potential to impact the larger financial system."
NASAA says that during Senate debate on the financial services reform bill, Collins said that "The creation of the Council of Regulators in this bill has not received a great deal of discussion, but I think it is one of the most important provisions in this reform, and it is one that has widespread bipartisan support. . . . I think we need to broaden the makeup of the council to include some State regulators so that the insurance area is covered, and State securities administrators, since they play such a critical role. I think those State regulators should be brought on to the council in a nonvoting capacity given the constitutional issues."
Dodd replied, in part, ". . .having the state regulators at least represented at that table makes sense to me as well. So maybe before this is over we can accommodate some of those additional ideas."