More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
The Financial Services Institute (FSI), the association of independent broker-dealers, e-mailed a 10-page letter to the SEC on Friday, warning of the “important unintended consequences” for IBDs, their reps and those reps’ clients should the SEC’s proposed changes to Rule12b-1 be adopted by the Commission.
Signed by the president and CEO of FSI, Dale Brown, the letter warns that adoption of Rule 12b-2 would have the effect of “limiting investor access to service and support” and instead would create a “duplicative, ineffective, post-transaction disclosure regime.”
FSI said it polled its individual advisor members to get their feedback on what 12b-2 would mean for them and their clients. The polled advisors, the letter said, would support “adoption of proposed descriptive names for mutual fund distribution fees and enhanced prospectus disclosure improvements” as called for in the proposal.
However, the advisors said they would oppose the “detailed confirmation disclosures” in the proposal, worried that the proposed new rule’s cap on ongoing sales charges would “reduce investors’ access to competent service and support,” and that moving “low net worth” clients from C-shares to investment advisory accounts would result in “higher costs for the investor.”
FSI says the conclusions to be drawn from their survey of advisor members is that those advisors would support “common sense improvements” to the disclosure of mutual fund distribution fees, but that the SEC’s proposal on making confirms more detailed would “confuse investors or prove ineffective.”
In its letter, the FSI argues that 12b-1 fees are at least partially responsible for the growth of the mutual fund industry and investors’ participation in mutual funds, and asks the SEC to “substantiate its recommendations” before changing the current mutual fund distribution fee “structure,” particiarly in light of the Commission’s “ongoing standard of care owed to investors” BDs and their reps.