More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
Not long after the SEC released its “Study Regarding Obligations of Brokers, Dealers, and Investment Advisers," on Jan. 21, three brokerage heavyweights came out for the tougher standard of care.
Reuters reported on Jan. 24, that Sallie Krawcheck (left), president of Bank of America Global Wealth and Investment Management, said: “The U.S. brokerage industry should have a common, tougher standard for providing investment advice.”
On Thursday, Bloomberg reported that Brian Moynihan (right), CEO of Bank of America Corp. has come out in favor of the fiduciary standard. According to the article, Moynihan “said making brokers act as fiduciaries is compatible with the firm’s model, which is to do what’s right for the client.”
The Bank’s Merrill Lynch brokerage arm has 14,500 registered representatives.
On Monday, Mark Casady (left), chairman and CEO of LPL Financial, praised the SEC’s Fiduciary Study, and endorsed the fiduciary standard, saying: "We welcome the clarity that the January SEC Staff Report brings to the retail financial advice industry. In particular, we agree with the report's recommendation for a uniform fiduciary standard, as we believe this is right for investors, financial advisors and the industry. We are confident this would help drive greater consistency and evenhandedness in the supervision of the broker-dealer and advisory sides of our industry. This would be positive for financial advisors and their clients, the vast majority of whom are neither cognizant of, nor concerned with, different definitions for the standard of care between financial advisor business models,"according to a company announcement.
LPL Financial, the largest of the independent broker-dealers, went public in 2010. Many of the affiliated advisors at LPL are both broker-dealer registered reps and registered investment advisors. LPL has 12,000 affiliated advisors and “supports” 4,000 insurance company affiliated financial advisors, according to the release.
Krawcheck’s SIFMA Speech
In a speech to SIFMA last April, Krawcheck made similar remarks, saying that brokerage industry has a "choice of two roads," and noting that "the full service wealth management industry has lost share for the past decade to the independents, the on-line brokers, the retirement providers, and most recently, to the regionals."
In that speech last spring, Krawcheck relayed what clients had told her as she traveled around talking with them: "Our clients simply say, 'I have no idea what fiduciary is, but it sounds good so just please put my interests in front of yours and do what is right for me.'" She added that, "embracing reform will enable us to champion what is indisputably right for clients."
Suggesting then that reform was “inevitable,” she asked the SIFMA audience to consider this: “Rather than focus on each other, how about shifting our focus to our clients?” She added that what clients had asked for boiled down to this: “First, listen to our clients, listen so as to hear, understand and address their priorities; Second, do right by our clients by embracing our fiduciary responsibility for them, Third, fight for our clients to deliver a superior client experience.”
For the latest news and analysis on the SEC Study releases and related developments, see:
The Fiduciary Study:
The SRO Study: