More On Legal & Compliancefrom The Advisor's Professional Library
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
Financial Services Institute President and CEO Dale Brown and Chairman Bill Dwyer met with reporters Tuesday morning to discuss the organization's 2011 initiatives. According to Brown, many are carry-overs from 2010, which they will continue to monitor and advocate for their member firms and individuals when appropriate.
“The implementation of Dodd-Frank and the fiduciary standard of care are the major issues moving forward,” Brown said. “We plan to continue to be a part of an ongoing dialogue with regulators and legislators. Achieving a higher uniform standard of regulation and closing regulatory gaps are a part of our core mission.”
Brown also mentioned 12b-1 reform and cultivating closer relationships with state regulators, especially where the organization has a concentration of members, as other priorities the organization is pursuing.
Two new initiatives Brown and Dwyer mentioned represent a departure from their traditional mission; more outreach in the retirement savings and investing arena, as well as assisting independent advisors with many of the issues they encounter as small business owners.
“For instance, we had a say (as did many other organizations) in the repeal of the 1099 reporting requirement for businesses with expenses over $600,” Brown said.
Brown was quick to note that although the organization is taking on new initiatives, it is taking on new staff as well to ensure it is not “having a say on many issues, but being effective on none.”
The organization recently added four new staff members, bringing the total to a dozen, with a new chief operating officer specifically mentioned.
When asked about the previous day’s question-and-answer session with Richard G. Ketchum, chairman and CEO of the Financial Industry Regulatory Authority (FINRA), Brown noted there was a clear consistency between Ketchum's public comments and what he says in private.
“The SEC has performed its studies,” he said. “Now it’s time to queue up the regulatory enforcement. But I agree with [Ketchum’s] comment about it still being the beginning of a long process. I don’t think we’ll get a legislative hearing before the summer, at least. And I’m not sure we’ll see any action before the end of the year.”
When asked about recent dissent at the SEC over the findings of the commission's dual studies (one involved the standard of care required of financial professionals; the other involved the appropriate level of regulatory oversight), Brown began by saying he was not surprised by the substance of the dissent by SEC Commissioner Elisse Walter over the findings of the regulatory oversight and examination study, but he was surprised by the lengths to which she went in order to have her comments made public.
“As far as the two dissenting members on the fiduciary study results, I was surprised by dissent to what many see as a settled question,” he said. “Will [SEC Chairperson] Mary Schapiro (left) now move forward with a three-to-two vote? It remains to be seen.”
When asked about his role with FSI, Dwyer, president of national sales and marketing for LPL Financial, noted he was vice-chairman in 2010 and has worked closely with Brown in developing and articulating the organizations first-ever five-year plan.
“The five-year plan is designed to bring clarity to FSI’s mission and goals,” Dwyer said. “I’ll help bring scalability to the organization, which we’ve already begun to do—with the board’s approval—by adding staff, most notably with the COO position we’ve created to separate those duties from the CEO function.”
When asked for more specifics on the retirement planning initiative, Dwyer said it will involve educational outreach.
“It’s interesting and frightening, that with the availability of information today, we still have the high level of financial illiteracy that we do,” he said. “We have this confluence of events, with the regulatory environment and baby boomers turning age 65. We’re in many ways working in a world of fear, which represent an incredible opportunity, and an incredible challenge.”