More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
The strength of the Financial Services Institute (FSI) comes from our members and their personal engagement in our advocacy agenda. We know that our ability to fight for our industry depends on the day-to-day involvement of thousands of independent financial advisors and financial services firms across the country. We also know that our members sometimes wonder how they can make a difference, given the large bureaucracies involved in each new rule, and the arcane deliberative processes that factor into financial legislation.
What many members don’t realize, however, is that opportunities exist to engage regulators right in their own backyards.
One of the best ways our members can get involved in the regulatory process is through active participation on FINRA District Committees. While FINRA itself may seem somewhat distant and imposing, the regulator’s nationwide network of 11 Committees serves, in part, to facilitate a dialogue between themselves and the financial professionals who are in the field solving problems for their Main Street American clients every day. Each District Committee comprises small, mid-size and large broker-dealer firms, with membership ranging from about seven to nine members.
One FSI member, Wilson Williams of Williams Financial Group in Dallas, has made advisor engagement with FINRA’s District Committees a particular focus for his firm.
“The more people you have involved in the dialogue with regulators, the more you can get their ear and make a difference,” says Williams.
For independent financial services firms and their affiliated independent financial advisors who are not involved with advocacy activities, Williams offered these sage thoughts: “To sit back and let someone else worry about fighting for our industry’s interests is not the correct approach. I think you have to get involved and volunteer your time. Work with people who can help you make a difference and create change.”
Williams strongly encourages his advisors to get involved with their local District Committees, whether by serving on the Committees themsevles or by establishing relationships with current Committee members.
Williams says that building stronger engagement with FINRA District Committees has improved his advisors’ understanding of the regulatory process and has helped them feel more empowered. “Involvement with the District Committees allows our individual advisors to feel that they have a voice, that they can participate in the process and that regulators are listening to them,” he says.
Williams’ experience in this area began with his own service as a member of FINRA’s District 6 Committee in Dallas. “It was a great experience, because I was able to relay my feelings on FINRA and its actions back to the regulators themselves,” says Williams. “Through the District Committee, I was able to let FINRA know which of the issues before it were important, and which were not. It was very effective.”
Williams’ efforts to get his firm’s advisors involved with FINRA at the district level reflect FSI’s own initiatives in this area.
We are continually working to build a more robust dialogue with FINRA officials and to help them better understand our industry’s concerns. We have endorsed FINRA to serve as the single self-regulatory organization (SRO) for retail investment advisers, and we are pleased and excited that FINRA CEO Rick Ketchum will speak to our Firm member CEOs at FSI’s National Discussions in Washington, D.C. in June. Within the past year, FSI’s strong relationship with FINRA has enabled us to limit potentially onerous new requirements on communications between firms and clients, and has helped us convey to FINRA our industry’s concerns regarding more stringent supervision rules, revenue sharing disclosure rules and numerous other issues. In addition, 16 new FSI members were elected to serve on FINRA District Committees around the country in January.
We applaud Wilson Williams—and all our engaged members—for their efforts to help advisors understand that they can make a positive difference in the regulatory process.
We echo his sentiment that proactive involvement is vital in effecting change and we hope that independent financial advisors around the country will join with us to make every effort to engage regulators and legislators in their communities as well.