More On Legal & Compliancefrom The Advisor's Professional Library
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Fifty-five House Republicans, led by Rep. Judy Biggert, R-Ill., sent a letter to Department of Labor Secretary Hilda Solis on Monday detailing what criteria should be met when the DOL re-proposes its rule amending the definition of fiduciary under ERISA early next year.
House Democrats sent a letter to Solis on Nov. 8 setting out the criteria they’d like a re-proposed fiduciary rule to follow.
The GOP lawmakers wrote in their Dec. 5 letter, “It is imperative that the Department, if it chooses to re-propose the rule, recognize the broad range of financial products and services currently available and avoid costly new regulations that may reduce choice among qualified service providers and investment products.”
To that end, the GOP lawmakers listed the following criteria that the re-proposed fiduciary rule should adhere to:
- It is carefully and effectively targeted to address well-defined and documented problems in the retirement planning advice business;
- It clearly recognizes that IRA accounts are significantly different from employer-sponsored plans because the IRA investor has nearly limitless choice among service providers and investment products;
- It ensures that plan participants and plan sponsors continue to be able to receive the critical information needed to expand retirement savings and coverage;
- It preserves investor access to and choice among suitable financial products and services delivered by qualified financial professionals;
- It avoids costly new regulatory requirements that exceed their proven benefits for investors; and
- It does not compound the investor confusion that the Securities and Exchange Commission's (SEC) recent study under the Dodd-Frank Act identified as the primary problem for retail investors. Effective regulation must add to public certainty, not diminish it.
Industry insiders debated on Dec. 1 when the SEC would issue a proposed ruling putting brokers under a fiduciary mandate.