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.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
The Municipal Securities Rulemaking Board (MSRB) is working on Dodd-Frank mandated initiatives to clarify and enforce rules governing municipal advice and transactions, according to a conference call Monday with the MSRB Chairman Michael Bartolotta (left), Executive Director Lynette Kelly Hotchkiss and Chief Communications Officer Jennifer Galloway.
The MSRB expanded its board of governors in 2010 and initiated a public member majority structure, with 11 public and 10 private members, chaired by Bartolotta, who is vice chairman of First Southwest Co. The board, which usually meets four times a year, has already met five times since October, Galloway said.
The board has also had regular meetings with FINRA’s Chairman and CEO Rick Ketchum (left) and SEC Commissioner Elisse Walter (right)—the most recent one last week—“so board members can have a personal interaction with Rick and Elisse,” Galloway noted. “Elisse Walter is particularly interested in the municipal market, and Rick Ketchum brings his municipal staff,” she added.
The MSRB wants to be “a resource to FINRA as FINRA enforces the rules,” Bartolotta explained.
The board had a special meeting in May to look at comments on pending rules stemming from Dodd-Frank legislation and will be proposing rules, with some alterations, to the SEC in June. Specifically the call focused on these three rules:
For “advisors and dealers,” Bartolotta explained, this rule clarifies the need for “fair dealing” when dealing with municipalities.
“The board fine-tuned the rule and clarified the language,” Bartolotta said.
Fiduciary Advisors to Municipalities Rule G-36
The Dodd-Frank Act specified a rule requiring fiduciary duty for advisors to municipal entities—“municipal advisors.” The “fiduciary duty framework has been approved going forward,” Bartolotta said, adding that the board “considered numerous comments,” about this rule.
The MSRB rule on fiduciary duty has nothing to do with duties to individual investors, which fall under a different area of the Dodd-Frank Act. For individual investors, the SEC has oversight of fiduciary duty—required of investment advisors—and FINRA oversees brokers, according to Galloway, most of whom fall under the suitability or buyer beware, rather than the fiduciary or client’s best interest, standard.
Is a Delay Inevitable?
When asked whether pending legislation for a delay in implementing the Dodd-Frank Act is a good idea, Bartolotta responded strongly: “We’re dealing with other people’s money here— the sooner you can get transparency and oversight regarding municipal derivatives, the better.”