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.
Fi360 told members of Congress recently that asking the Department of Labor (DOL) and Securities and Exchange Commission (SEC) to “harmonize” their fiduciary rules would create “significant challenges,” as the fiduciary standards under securities laws and the Employee Retirement Income Security Act (ERISA) are “quite different.”
Blaine Aiken, fi360’s CEO, and Duane Thompson, senior policy analyst for fi360, told members of the House Financial Services Committee that if the SEC and DOL were to truly harmonize their rules—something Congress has been pressing the agencies to do—then the agencies would be left with one of two stark choices: require the SEC to impose a higher standard commensurate with ERISA standards, or require the DOL to violate clear legislative requirements under ERISA and thereby weaken the strong fiduciary protections now afforded to retirement plan participants.
Stated another way, Aiken (far left) and Thompson (left) said, “it is our view that an act of Congress is necessary to clear up conflicting areas of the two laws and to provide both agencies with sufficient guidance to proceed if rules harmonization were the primary objective (which, by the way, we believe is neither wise nor consistent with long-standing public policies in this area of law).”
For instance, the two told lawmakers that the fiduciary standards under both laws are “historically quite different in their purpose and application, resulting in significant challenges when attempting to harmonize rules that cover retirement planning activities under each law.”
Aiken and Thompson argue that under the Advisers Act of 1940, “whether the client’s financial goal is saving patiently for the long-term to ensure financial security in retirement, or investing in penny stocks to get rich tomorrow, the fiduciary standard under the Advisers Act permits a large amount of discretion in an advisor’s decision-making process to accommodate the client’s objectives.” However, application of a fiduciary standard under ERISA is “far different,” they said, “in that it imposes fiduciary duties in addition to any specified duties of disclosure.”