More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
While 2010 was the year that produced the Dodd-Frank Act, one of the most comprehensive financial reform bills in more than 70 years, 2011 will be the year when “many of the questions that are outstanding as to how financial services will be changed” will be answered, said Tim Ryan, CEO of the Securities Industry and Financial Markets Association (SIFMA), during a state of the industry press briefing on Tuesday.
SIFMA, Ryan (left) said, will play an active role in helping regulators craft an “end result” to how regulations that emanate from Dodd-Frank will affect the financial services industry.
This month, which marks six months since the passage of Dodd-Frank, the industry will see “the shape of regulatory reform become clearer,” added John Taft, chairman of SIFMA, during the call. Not only is the Commodity Futures Trading Commission (CFTC) starting to issue rules, but this week marks the deadline for the three reports to Congress regarding a self-regulatory organization (SRO) for advisors, the Government Accountability Office’s (GAO) report on regulation of financial planning, and the SEC’s report on fiduciary duty. Both the GAO report and the Securities and Exchange Commission’s (SEC) SRO report will be released Tuesday. The SEC’s report on fiduciary duty is due out by Friday, Jan. 21.
Ira Hammerman, SIFMA’s general counsel, said on the same call that while SIFMA supported a universal fiduciary standard of care for brokers and advisors, in crafting a fiduciary standard, SIFMA was “suggesting the SEC take this opportunity to give a clear definition of fiduciary--to ‘operationalize’ what is meant by a fiduciary standard. We need guidance from the SEC to ‘operationalize’ the new standard of care.” Implementation of a fiduciary standard of care for the brokerage industry, he said, would be “an enormous undertaking.”
In a typical year, SIFMA files from 60 to 100 comment letters on various topics, but since its passage, the trade group has already filed 50 comment letters regarding Dodd-Frank alone, said Ken Bentsen, EVP of public policy and advocacy at SIFMA. While SIFMA will remain focused on Dodd-Frank’s implementation, Bentsen noted that SIFMA will also be keeping close watch on the potential new regulations and taxes that will emanate from the 50 new state legislatures that were christened in January.
Ryan also noted that President Obama’s OpEd in Tuesday’s Wall Street Journal issuing an executive order on the government-wide review of regulation—which was not limited to financial services—“sets the right tone.” Said Ryan: “Getting it right on Dodd-Frank is very important to us, not only because of its effect in the U.S., but a key component is synchronization of these rules on a global basis.”