More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
"This is a huge victory for investors," says Knut Rostad, chairman of The Committee for the Fiduciary Standard and the Regulatory and Compliance Officer at Rembert Pendleton Jackson Investment Advisors in Falls Church, Virginia. Under the House-Senate compromise, "the [SEC] study is shortened to six months, the SEC has the authority to commence rulemaking [on a fiduciary standard], and the rulemaking must provide a standard consistent with the Adviser's Act" of 1940. "Those three aspects alone," Rostad says, "culminate in a huge victory" for investors.
David Tittsworth, executive director of the Investment Adviser Association (IAA) in Washington, says the agreement "marries major parts of both the House and Senate bills. The conferees essentially stapled major parts of the Senate study to major parts of the House rulemaking provisions."
The agreement, he continued, "includes many of the Senate provisions requiring the SEC to conduct a study of broker/dealer and investment advisor regulation (changing it to a six-month study instead of one year). It also includes many of the House provisions authorizing the SEC to issue rules that would impose the Advisers Act fiduciary duty on brokers who provide personalized investment advice to retail customers (changing 'shall' to 'may')."
Assuming the bill becomes law, Tittsworth says, "the debate will shift from Capitol Hill to the SEC. We expect to be active participants in the SEC study and any subsequent rulemakings."
Kristina Fausti, director of regulatory and legal affairs for fi360, says that "On the positive side, the SEC will now be required to finish its study within six months, which will allow the agency to get it done quickly and move on to next steps. Also positive is the fact that the SEC now has the authority to adopt a fiduciary standard for broker/dealers providing advice.
"The downside, though, is that nothing in the bill says that the agency must use that authority and create new rules. That means the work is not done for fiduciary advocates, and we must ensure that the SEC now takes action and stands behind everything that Chairman Schapiro and Commissioners Aguilar and Walter have said they support in terms of bringing broker/dealers providing advice under that same fiduciary standard of care as investment advisors."