More On Legal & Compliancefrom The Advisor's Professional Library
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
- Pay-to-Play Rule Violating the pay-to-play rule can result in serious consequences, and RIAs should adopt robust policies and procedures to prevent and detect contributions made to influence the selection of the firm by a government entity.
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."
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