More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
The last few weeks in Washington, D.C., have provided yet another stark reminder to independent financial advisors and executives at financial services firms of the critical role FSI plays as our industry’s “rapid response” team on Capitol Hill and with regulators and legislators across the country.
On February 7, during the Senate Finance Committee’s review of a massive new highway bill, committee chairman Max Baucus (D-Mont.) added a provision that would have ended tax-deferred “stretches” of inherited IRAs for beneficiaries other than spouses, minor children or the disabled. Under the provision, most beneficiaries would have been forced to pay taxes on inherited IRAs over a drastically shortened five-year timeframe, rather than being allowed to defer the taxes over the beneficiary’s lifetime, as is currently permitted
This proposed new restriction on IRAs would have hurt small investors and financial advisors all over the country. If left unchallenged, it would have created a major deterrent against saving at a time in our nation’s history when saving is already strained, to say the least—all to fill the coffers of a government that refuses to make the difficult decisions needed to get its own fiscal house in order.
FSI—and our growing community of highly engaged financial advisors—were not about to allow investors’ IRAs to be targeted without a fight. On February 15, we issued a last-minute Call to Action to our members, urging them to write to their senators to oppose this troubling provision.
Within a few hours, over 2,000 FSI members responded, telling their senators loud and clear that increased taxes on inherited IRAs should not be used to pay for the highway bill or any other governmental spending for that matter.
I’m pleased to report that the legislators heard our message.
Two days after issuing our Call to Action, an amendment to the highway bill by Senate Majority Leader Harry Reid (D-Nev.) eliminated the tax on stretch IRAs. We applaud Leader Reid for his decisive action. With the daunting challenges small investors face in this economy, it is encouraging that our leaders understand the importance of upholding retirement savings in America.
For independent financial services firms and the financial advisors affiliated with them, though, there is a clear takeaway from the experience of the last several weeks: New legislative and
Whether it’s a financing provision inserted in a highway bill in Washington, D.C., a proposal from the Department of Labor (DOL) redefining the term “fiduciary” and banning commissions from being earned on IRA advice, or state legislation in California that would place new restrictions on financial advisors operating as independent contractors, our industry today is subject to an unprecedented number of regulatory and legislative initiatives.
These initiatives, if left unchallenged, could fundamentally alter the way our members do business, and could impede their ability to provide cost-effective professional financial advice to their clients on Main Street.
Fortunately, though, our industry has a voice on these issues and, as our track record shows, FSI knows how to make it heard.
When the DOL launched its “fiduciary” proposal, we responded quickly and decisively, beginning with our comment letter to the agency and continuing with a Call to Action to our members that resulted in over 5,000 letters from our financial advisor members pouring into the White House. The DOL withdrew its proposal for further review in September, and we remain more engaged in the issue today than ever.
As FSI and our community of highly engaged financial advisors continue to grow, our “rapid response” capabilities toward new legislative and regulatory threats to our industry will only get stronger. Our advocacy activities on the Senate highway bill underscore this fact and, we hope, grows our credibility and trust within our industry.