More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Tim Ryan, CEO of the Securities Industry and Financial Markets Association (SIFMA), said Tuesday that the industry was at the beginning of a two- to five-year “journey” in implementing the many studies and rulemakings required under the Dodd-Frank Act.
Speaking at the National Economics Club in Washington on how the U.S. and the European Union are responding to regulatory issues under Dodd-Frank, Ryan noted that Dodd-Frank calls for 235 rulemakings, 41 reports and 71 studies.
"Parallel rulemaking," Ryan (left) said, “is taking shape across the globe,” in response to Dodd-Frank. Despite the fact that Dodd-Frank requires “a huge amount of work to be done in the first year,” Ryan continued, “this isn’t simply about meeting rulemaking deadlines, it’s about getting it done right. The stakes are too high for anything less.”
Poorly crafted regulations that create market distortions, Ryan said, “or other unintended consequences could constrain capital formation or even increase systemic risk—the exact opposite of the intent of Dodd-Frank.”
While SIFMA is focused on seven primary areas under Dodd-Frank—systemic risk, the Volcker rule, resolution authority, derivatives, securitization and credit ratings agencies, capital and liquidity, and a fiduciary standard of care for brokers—other key issues for SIFMA are reforming the GSEs and taxes. Ryan noted that six out of the seven areas in Dodd-Frank that SIFMA is focusing on “have a global, or at least EU, equivalent.”
Ryan said that SIFMA supports creating a “federal fiduciary standard that would apply—uniformly—to all investment advisors and brokers” providing investment advice to retail investors, a rulemaking that he called a "domestic issue." But “making sure the standard is written in a way that preserves investor choice of the products and services that best fit individual investment needs” will be tough, he said.
Ryan noted in comments after his speech that a fiduciary standard for brokers will likely be a “modified ’40 Act standard” that incorporates additional disclosures. But, he said, it will be “disclosure that’s understood.”
Another issue of high importance, Ryan said, is taxes. If Congress doesn’t act by year-end, he said, capital gains and dividend tax rates will increase by 33% and 164%, respectfully, on January 1, 2011. Congress “must provide certainty,” he said, “by extending the current 15% rates on capital gains and dividends before the end of the year.”
Read about Treasury deputy Wolin's next steps on Dodd-Frank at AdvisorOne.com.