More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- 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.
“We support the concept of a fiduciary standard” for all advice-givers, said Scott Curtis, president of Raymond James Financial Services, but he argued in a Tuesday interview that “it hasn’t been defined to the FA level.”
Until it is defined to that level, said Curtis during RJFS’ annual conference for independent contractor reps, it would be imprudent to speak about embracing fully such a standard.
Curtis (left) was speaking at the annual Raymond James Financial Services' National Conference for Professional Development for RJ's independent broker-dealer representatives. In January, Curtis became president of RJFS, succeeding Dick Averitt, who on Monday was lauded for his long leadership of the group (Averitt remains chairman of RJFS).
In a media rountable during the conference in Orlando, Curtis recalled attending a session at the Financial Services Institute’s annual conference earlier this year where one independent broker-dealer executive suggested the industry should just move ahead and embrace a fiduciary standard. On Tuesday, Curtis said he thought at the time, and still does, “Move ahead with what?” and then raised the question of whether the standard should be the SEC’s or the Department of Labor’s.
Take the issue of conflicts of interest, Curtis suggested. Under the SEC’s fiduciary standard, when a conflict of interest arises between an advisor and a client, the conflict must only be disclosed to the client. Under the DOL’s ERISA fiduciary standard, however, such a conflict, Curtis said, “must be eliminated.” Under that standard, he argued, an advisor would be prohibited from selling a client a bond, for example, if his broker-dealer “made a little money” from selling the bond.
Then there is the related issue of what in fact constitutes an advisor acting in “the client’s best interest.” Does that mean that the cheapest investment alternative is always in the best interests of the client, Curtis wondered, pointing out that advisors have different investment approaches—some believe in the cheap index approach, others favor picking active money managers—that might conflict with recommending merely the least expensive product available.
“There’s great complexity here,” Curtis concluded. “Let’s define it first” and then move on.