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.
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
As always, when looking to make sense of the regulatory environment, we turn to Dale Brown, president and CEO of the Financial Services Institute. Brown has taken up the flag in Washington for independent broker-dealers and advisors since the advocacy organization’s founding in 2004. As you might expect, a little thing called “Dodd-Frank Wall Street Reform and Consumer Protection Act” made for an interesting conversation.
Q: Almost feels like a leading question, but what hot regulatory topics are you working on?
A: We have a number of issues from 2010 that we are monitoring and keeping an eye on, but we also have a few initiatives that we want get out in front of in 2011, particularly when it comes to the advisors themselves. The implementation of Dodd-Frank is obviously something we continue to monitor.
Q: Do you think its implementation will be softened a bit now that Republicans have the House?
A: No, I don’t think it will have a dramatic impact in how the law is implemented. There isn’t the political will, for lack of a better term, to overturn the legislation once it’s in place. And remember, Republicans only have the House, which is still a big deal, but it still is only the one institution. However, I do think Republicans will be much more aggressive in their oversight of the regulators, which isn’t a bad thing.
Q: What about the lame duck period? What are you watching for?
A: The independent contractor status. There is language in Dodd-Frank that we are watching very closely, because the provision to change the nature of the independent contractor status, which is central to our members, could be attached to another bill as a way to pay for it. If nothing happens until the Republicans are back, then we don’t think it will be as much of a concern. We feel we are in good shape, but we’re keeping a close eye on that.
A: What about initiatives for 2011?
Q: As an advocacy organization, quite frankly so much of what we do is in playing defense, but we do have plans, as I mentioned, to get out ahead of a few issues in the coming year. One is to be more involved in retirement savings and retirement investing, and being involved in ways to help and educate the public. Also, we have primarily been an advocacy organization in Washington, but now we want to branch out more to help advisors with their small businesses. For instance, we (like so many others) had a strong voice in defeating the 1099 reporting requirements for small business initially contained within the bill. So we want to expand to help advisors with the issues of running a small business. And lastly, state regulators have such a big role in affecting how our members do business, so we want to recognize their involvement, and seek to better our relation with regulators at the state level.
Read more from the 2011 Investment Advisor Career Guide: