June 16, 2010

Barney Frank Calls for Fiduciary Standard and SEC Self-Funding

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  • 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.
  • 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.

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 kmcbride@wealthmanagerweb.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.


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