More On Legal & Compliancefrom The Advisor's Professional Library
- Meeting and Exceeding Clients and Regulators’ Expectations Although it can be difficult, there are ways for RIAs to meet or exceed client expectations, increase customer satisfaction, and help firms retain current clients and attract new ones.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Securities and Exchange Commission (SEC) is proposing to extend the date on which temporary rule 206(3)-3T sunsets by another two years, from Dec. 31, 2012 to Dec. 31, 2014.
The temporary rule establishes an alternative means for investment advisors that are registered with the Commission as broker-dealers to meet the requirements of section 206(3) of the Investment Advisers Act when they act in a principal capacity in transactions with certain of their advisory clients.
The SEC said in announcing the proposed amendment that the agency was proposing the extension because it “continues to believe that the issues raised by principal trading, including the restrictions in section 206(3) of the Advisers Act and our experiences with, and observations regarding, the operation of rule 206(3)-3T, should be considered as part of our broader consideration of the regulatory requirements applicable to broker-dealers and investment advisers in connection with the Dodd-Frank Act.”
The SEC said that as part of the agency’s “broader consideration” of the regulatory requirements applicable to broker-dealers and advisors, the SEC intended “to carefully consider principal trading by advisers, including whether rule 206(3)-3T should be substantively modified, supplanted, or permitted to sunset. In making these determinations, we will consider, among other things, the [SEC’s] 913 Study [regarding putting brokers under a fiduciary mandate], relevant comments received in connection with the 913 Study and any rulemaking that may follow, the results of our staff’s evaluation of the operation of rule 206(3)-3T, and comments we receive on rule 206(3)-3T in connection with this proposed extension.
The proposed extension was put out for a public comment period. The SEC asked commenters to give their views on the following questions:
• Should we allow the rule to sunset?
• If so, what costs would advisers that currently rely on the rule incur? What would be the impact on their clients?
• If we allow the rule to sunset, should we consider requests from investment advisers that are registered with us as broker-dealers for exemptive orders providing an alternative means of compliance with section 206(3)?
• If we extend the rule’s sunset date, is two years an appropriate period of time to extend the sunset date? Or should we extend the rule’s sunset date for a different period of time? If so, for how long?
• Is it appropriate to extend rule 206(3)-3T’s sunset date for a limited period of time in its current form while we complete our broader consideration of the regulatory requirements applicable to broker-dealers and investment advisers?