More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- 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.
On June 6, I testified before the House Financial Services Committee on H.R. 4624, the Investment Adviser Oversight Act of 2012. H.R. 4624 is the bill that was introduced a few weeks prior to the hearing by Rep. Spencer Bachus (R-Ala.), who chairs the House Financial Services Committee. It authorizes the SEC to designate one or more “national investment adviser associations” that would have broad authority to regulate and inspect thousands of investment advisory firms. As such, the bill is tailor-made for FINRA (formerly NASD and NYSE Regulation), the self-regulatory organization (SRO) for broker-dealers, as I've blogged about before for AdvisorOne.
FINRA is lobbying hard to expand its turf to investment advisory firms. It is using its vast resources to convince members of Congress to support the Bachus SRO bill. FINRA is using its very highly compensated staff, as well as the services of many influential outside lobbyists (including Michael Oxley, the former chairman of the House Financial Services Committee). FINRA also is being supported by broker-dealer and insurance groups that know how to use their money, clout and active grassroots programs to support their legislative agenda.
But thanks to many investment advisory firms, as well as other groups and organizations, we have had some success in making our voices heard on Capitol Hill. While our work is far from done—and, in fact, we continue to fight an uphill battle— it is heartening to see more investment advisors than ever helping to educate members of Congress and their staffs about these important issues. During the 15 years I have been working for the Investment Adviser Association (IAA), this is the most prolific and concerted effort by the investment advisory profession on any legislative issue I have ever witnessed.
The IAA’s membership consists of SEC-registered investment advisory firms, and we have encouraged all IAA members to contact members of Congress, particularly if they have a connection with a member of the House Financial Services Committee. Our members have responded by sending emails, making phone calls and meeting with their elected representatives.
The Financial Planning Coalition, which consists of the CFP Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors, has led a similarly effective grassroots effort. The North American Securities Administrators Association (NASAA), which represents state securities regulators, also testified in opposition to H.R. 4624 at the June 6 hearing and maintains an active presence on Capitol Hill. Other groups, including the personal financial planning section of AICPA, have been helpful in opposing FINRA and supporting investment advisor user fees as an alternative.
Two broker-dealer businesses deserve special commendation. Schwab Advisor Services has been a longtime active participant in opposing an SRO for investment advisers. Bernie Clark, who leads Schwab Advisor Services, emailed thousands of Schwab’s clients a few days before the June 6 hearing, urging them to oppose H.R. 4624 and to contact members of Congress to express their concerns about the bill “We believe advisors are best regulated through principles-based regulation by the SEC, supplemented by more examination resources, as opposed to rules-based regulation and oversight by an SRO,” Clark wrote. TD Ameritrade Institutional also has played an active and leading role on these issues. Last fall, TD joined IAA and the Financial Planning Coalition to fund a study by the Boston Consulting Group comparing the costs of SEC vs. FINRA oversight. More recently, Tom Nally, president of TD Ameritrade Institutional, urged advisor clients to make their concerns about H.R. 4624 known to their elected representatives. Both Schwab Advisor Services and TD Ameritrade Institutional participated in the IAA’s Lobbying Day on Capitol Hill on June 7.
These efforts have had direct results. For example, we saw the number of communications sent to Capitol Hill via our website grow from 200 to more than 650 in a few days. While these are modest efforts, we know they can make a huge difference.
It is not too late for you to join the growing chorus of voices opposing H.R. 4624. Even if the bill does not move during this Congress, it is almost a certainty that these issues will return next year. The more that the investment advisory community can do now to educate members of Congress, the better our chances are of having a meaningful impact on the ultimate outcome.
As always, I welcome your thoughts and feedback.
And please take time to communicate your views on the Bachus bill to members of Congress!