From the August 2010 issue of Investment Advisor • Subscribe!

Advice to the SEC

Sidebar to the article "Finding Their voice"

More On Legal & Compliance

from The Advisor's Professional Library
  • Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients’ financial well-being may be jeopardized.  RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.   
  • Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.

When it comes to the fiduciary standard, and the six-month study that the SEC will conduct to determine whether brokers should be held to such a standard, Capital Analysts President and CEO Matt Lynch says advisors "want to be sure the SEC seeks and gathers input from the industry as to how to implement these important changes.

"I've been involved in a number of meetings with the SEC and FINRA, and I've said I think there is a difference between disclosure and transparency, [and] that ultimately what [the SEC] should be doing is making it easier for the investor to understand the nature of the relationship between themselves and the advisor--including how the advisor is paid, who's paying him, and where any conflicts of interests may exist. I believe a different way of providing that financial literacy to the client would be important to add to the SEC regulations. My concerns would be that the SEC produce guidance subject to interpretation but doesn't really give the industry enough information to take action. I think changing the way we communicate with clients would be a good thing."

Return to "Broker/Dealer Marketing: Finding Their Voice."

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