More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- 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.
On the one-year anniversary of the signing of Dodd-Frank on Thursday, the representatives of the independent broker-dealer industry remain concerned about the lack of clarity on implementation of some key issues emanating from the act, along with the law’s unintended consequences.
When asked whether he thought Dodd-Frank had done a good job of protecting consumers and the markets from another financial crisis, Dale Brown said he “wouldn’t opine on the broader impact” but rather would focus on the issues that affect the members of the Financial Services Institute (FSI), where Brown has long served as president and CEO and chief spokesman for the IBD community.
“Has investor choice and investor access been helped by Dodd-Frank? Not yet,” Brown said in a Thursday interview with AdvisorOne. “The potential is there to eventually be a resounding 'Yes' to that question, but we’ve got a long way to go.”
For Brown (left) and the FSI, what’s at stake is “investor choice and access,” that independent BDs and its representatives continue to be able to “serve the broadest cross section of clients in the marketplace”—from the high-net-worth to “scaling their practices to what smaller investors need. We want to be sure that small investors, the Main Street investor, has access” to independent advice. “They’re the ones,” Brown said, who stand to “get their choices restricted” should implementation of Dodd-Frank be accomplished in a certain way.
Forestalling that restriction, Brown suggested, would include implementation of “harmonized, effective regulation” for all advice givers, on which, he said, “we’re no closer to that goal than we were a year ago.” Another, he said would be establishing a self-regulatory organization for RIAs. FSI remains in favor of FINRA being the SRO of choice for investment advisors, he said, because “ we’ve got to acknowledge that the status quo regarding nvestment advisors is no longer acceptable. The regulatory gap must be closed.”
Assuming that's the case, “What’s the most efficient option available to close that gap for investors and the industry? An SRO for advisors, and FINRA is the best candidate.” Brown said that FSI was “very pleased” to see the Consumer Federation of America “coming to that same conclusion.” (CFA’s Barbara Roper expressed the consumer group's decision in favor of an SRO for RIAs last week.)
Another issue FSI is concerned about it is the lack of “clarity” on a uniform fiduciary standard for all advice givers. He expressed satisfaction that the SEC “will work on this [a uniform fiduciary standard of care] in the latter half of the year,” while he said that “closing the regulatory gap will take longer because it’s a legislative” issue. FSI will make its voice heard in that legislative process, he vowed. “We’ll be very engaged in that.”
“Here we are one year later,” Brown said, “and we have no more certainty than we did before the President signed the bill into law.” Some of that uncertainty, he admitted, is due to the “sheer massive size of Dodd-Frank and the undertaking required to implement it.” However, he said, “There are consequences to the uncertainty along with unintended consequences.”
For more on the fiduciary issue and the Dodd-Frank first anniversary, see:
And additional AdvisorOne reporting on the Dodd-Frank anniversary.