More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Lawmakers took Labor Secretary Hilda Solis to task Wednesday over how the DOL’s recrafting of its fiduciary rule is progressing—specifically how the department is collaborating with the Securities and Exchange Commission, the timing of the reproposed rule, and the rule’s inclusion of individual retirement accounts (IRAs).
Solis testified before the House Committee on Education and The Workforce on Labor’s 2013 budget and the agency’s priorities.
Rep. Carolyn McCarthy, D-N.Y., who also sits on the House Financial Services Committee, told Solis that a final outcome on DOL’s and SEC’s fiduciary duty rules “has been dragging on for some time now. It’s not good. Businesses need to know what to do.” McCarthy said Labor officials “need to sit down with members of Congress [and discuss] where this [fiduciary rule] is going.”
McCarthy added that “many of us here on this particular committee, [and] many on the Financial Services Committee, would like to work together and see if we can come to some sort of resolution in the near future.”
Solis replied that she would encourage Phyllis Borzi, assistant secretary of labor of the Employee Benefits Security Administration (EBSA), the chief architect in re-crafting the proposed fiduciary rule, to set up a meeting with lawmakers.
McCarthy also questioned Solis on why Labor has said it may release its reproposed rule in May when the SEC has not given a specific timeline for releasing its fiduciary rule.
Solis said: “I’m not interested in pushing this [reproposed rule out] until we have everything we need. We want to have a fully fleshed-out rule.”
Solis then cited EBSA’s attempts to secure additional information from industry groups on the department’s request regarding what impact the conflicts of interest faced by brokers and advisors who advise on IRAs have on IRA investors.
Labor, Solis added, is also disappointed that Oliver Wyman has declined to hand over data underlying its report stating that applying a fiduciary standard to IRA recommendations is costly.
While McCarthy said lawmakers had heard Labor and the SEC were sending “emails back and forth” in their efforts to collaborate on their fiduciary rules, Solis responded: “It’s not just emails. We’ve been working with the other agencies involved” in crafting the fiduciary rules.
Rep. Judy Biggert, R-Ill., asked Solis if Labor—as the agency did in the past with the Treasury Department—would issue a joint Request for Information (RFI) with the SEC since Congress, under Dodd-Frank, gave the SEC, not the Labor Department, the authority to write new fiduciary rules for brokers.
Solis replied that she couldn’t say whether Labor would issue a joint RFI, citing the Administrative Procedures Act.
Tim Ryan, president and CEO of the Securities Industry and Financial Markets Association, said Monday at SIFMA’s compliance conference in Miami that SIFMA would “like to see the SEC and the Department of Labor move forward together, so that we actually have one [fiduciary] standard, not multiple standards.” He said SIFMA hopes both agencies come out with a rule “if not this year, than early next year so we could comment on and basically really level the playing the field for advice.”
Collaboration between the agencies does indeed appear to be taking place as Michael Davis, deputy assistant secretary of labor, said Monday at the American Society of Pension Professionals and Actuaries' (ASPPA) annual conference in New Orleans that Labor's reproposed fiduciary rule would be accompanied by a set of prohibited transaction exemptions that address 12(b)-1 fees, revenue sharing and principal trading—all top issues for the SEC as well.