More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
At the Securities Industry and Financial Market Association’s annual meeting in New York on Tuesday, SIFMA President and CEO T. Timothy Ryan Jr. put his support behind the Dodd-Frank reform act but scoffed at the Volcker Rule as unworkable.
Before a packed audience at the Marriott Marquis on Times Square, Ryan (left) noted that “no one can be happy with where reform stands,” considering that political and bureaucratic constraints have produced a complex 2,300-page law that required 87 studies by regulators and will ultimately lead to an estimated 398 rules.
Yet Ryan conceded that reform is needed.
“These reforms are critical to restoring the trust and confidence that is so essential to our markets,” he said in prepared remarks. “We have also been upfront in objecting to provisions that we believe are, at best, extraneous and unrelated to the financial crisis, such as the Volcker Rule. But, we have never supported a complete repeal of Dodd-Frank, and do not support repeal now.”
Also on hand during the morning’s presentations were SIFMA Board Chairman Chet Helck, who spoke about the emotional side of the beleaguered finance industry, and Gary S. Gensler, chairman of the U.S. Commodity Futures Trading Commission, who spoke about the future of derivatives transparency.
Helck, who is also CEO of the Global Private Client Group at Raymond James Financial, noted that while policy changes are critically important, he wanted to talk about the feeling side of the business—namely, the advisor-client relationship.
“Feeling good about being in our business has been a challenge,” Helck (right) said. “We know we do good, but does anybody else believe that?”
Yet the finance industry employs close to 8 million people nationwide, funds the building of roads and bridges and has helped U.S. companies raise more than $1 trillion to create jobs, Helck said.
“Our main job this year is to restore trust in our industry,” he said, acknowledging that regardless of the results of the presidential election, the industry has a lot of explaining to do to skeptics on Main Street and Capitol Hill. “We have to fix what’s wrong and take accountability and then emphasize what’s right.”
In a similar vein, Gensler addressed the CFTC’s role in the financial crisis of 2008, saying that the U.S. public will benefit from real-time reporting for the $650 trillion global derivatives market by 2013.
“The Dodd-Frank Act’s goal is to ensure the swaps market better serves the rest of the economy,” Gensler said in prepared remarks. “The law, in its simplest form, is about bringing competition and transparency to the swaps market….It’s about lowering the risks of swap dealers and the swaps market to taxpayers.”
Gensler went on to say that as of Oct. 12, “these common-sense reforms are becoming a reality,” with swap dealers beginning the process of registration of transactions in real time. “We anticipate that many will do so by Jan. 1. For the first time, regulators and the public are beginning to benefit from market transparency. And central clearing will soon lower risk and help level the playing field for anyone who wants to compete in the market.”