More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- 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.
At the House-Senate conference to reconcile respective Wall Street reforms bills, House Financial Services Chairman Barney Frank called for the final bill to include fiduciary standard for brokers who provide investment advice to retail investors and for the SEC to keep the funds it raises through current fees. These two reforms are "essential to protecting investors," says Frank at reconciliation conference for Wall Street reforms bills. These were contained in the House bill but stripped from the Senate version.
Frank noted a long list of letters from industry groups that support the fiduciary standard, including the "National Association of Financial Planners, AARP and National Governors' Association," and said he was particularly "impressed with" the support of the Texas Securities Commissioner, Denise Voigt Crawford.
Rep. Paul Kanjorski (D-Pennsylvania) called the fiduciary requirement "long overdue." He also admonished members that "during the worst financial disaster in the country we were grossly underfunding the SEC." SEC self-funding is much misunderstood; currently the SEC only receives a portion of the fees it raises. Congress makes an appropriation to the SEC and has for the past several years kept about one-third of the fees that the SEC collects each year. The difference has hovered near $400 million. Self-funding would also allow the SEC to budget certain items over multiple years instead of year-by-year, which can make a difference in spending on items like technology.
The hearing is being broadcast live on C-Span.
Comments? Please send them to firstname.lastname@example.org. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.