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.
- 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.
On Tuesday, the Financial Services Institute (FSI) pushed 2,000 advisors and 18 broker-dealers in California to lobby against a state senate bill that would require broker-dealers to manage and maintain forms for independent- contractor financial advisors.
The group sent out an alert to its Golden State members in anticipation of a vote Wednesday by the state assembly’s labor committee and a vote next week by the judiciary committee.
“This is another regulatory challenge and matter to comply with for broker-dealers and advisors,” said Matt Schwartz (left), government-affairs counsel for the Atlanta-based lobbying group, in an interview. “Most of them already do this in their disclosures.”
The California Senate passed SB 459 on June 2. It if is approved by the Assembly Committee on Labor and Employment and the Assembly Committee on Judiciary, it should be considered by the Assembly Appropriations Committee on Aug. 15.
“This new and additional disclosure and record-keeping obligation would create additional unnecessary costs for the broker-dealer that would be passed on to the financial advisor,” according to an FSI statement.
The measure would also increase administrative costs for the state to the tune of about $250,000, Schwartz explains.
Under the new rules, broker-dealers would be required to retain independent-contractor forms, which would be reviewed by the state, for two years. “These costs would have to be absorbed by firm or passed onto the advisor or the consumer,” Schwartz said.
The state of California is hoping to raise funds and cope with its budget deficit by looking into the issue of whether or not some workers are being misclassified as independent contractors, according to FSI.
“Independent financial advisors are being properly classified,” Schwartz explained. “Their funds flow through the broker-dealer and are reported on 1099 forms. We are inadvertently swept up into this, which is not the aim of the bill.”