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.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
The Senate passed its version of the financial services reform bill, S. 3217, on Thursday, May 20, by a 59-39 vote. After the sweeping reform bill passed, Knut A. Rostad gave his opinion on the bill to Kathleen McBride, Editor in Chief of WealthManagerWeb.com.
By Knut A. Rostad
Public confidence in Congress today, by all accounts, is lower than was Richard Nixon's public approval as he resigned from the presidency. The absence of a requirement that brokers who give investment advice be regulated like investment advisors is stupefying, but not surprising.
Investors' (voters) historically low expectations of Congress have been met.
Many members of Congress rail against heavy-handed regulation that "picks winners and losers." Libertarians should take note. The financial reform legislation--legislation heralded as the "Biggest regulatory overhaul of Wall Street since the depression"--essentially concludes that brokers who talk like investment advisors and work like investment advisors and persuade clients to trust them like investment advisors should not, however, be required to put clients' interests first as the law requires of investment advisors. Brokers who act like investment advisors can continue, if they wish, to not avoid conflicts, or to not disclose and manage conflicts, to not control investment expenses, and to not, of course, tell a client how much the client is actually paying the broker in compensation.
Twenty three days after Goldman Sachs explained to the entire world, in excruciating detail, that the suitability standard means it's fine to conceal a huge conflict of interest from a client (because the client is very smart, and understands Goldman's role as a market maker), the Senate effectively endorsed the "Goldman standard" for institutional clients and applied it to all retail clients of brokers. This is not the world's greatest deliberative body's proudest moment.
Knut A. Rostad, email@example.com, is regulatory and compliance officer at Rembert Pendleton Jackson, a registered investment advisor in Falls Church, Virginia, and chairman of The Committee for the Fiduciary Standard.