More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- 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.
Nearly a year after saying it would, the Securities and Exchange Commission on Friday published its request for public comment on its rule to put brokers under a fiduciary mandate.
In releasing the request, SEC Chairwoman Elisse Walter (left) said that “studies have shown that few investors realize that the standard of care they receive depends on the type of investment professional they use. And often investors do not know which type of financial professional they are relying on.” This request for information, she said, “will help us in our ongoing consideration of alternative standards of conduct for certain broker-dealers and investment advisers, as well as potential harmonization of other aspects of regulation in this area.”
The request comes just days after Republicans on the House Financial Services Committee criticized the SEC for moving forward with its fiduciary rule, calling the rule a “misplaced priority.”
However, Sen. John Tester, D-Mont., told Walter during a recent Senate Banking Committee hearing to "push" the fiduciary rule, as he believes "it should be a priority because it is a benefit to investors."
Specifically, the SEC says it is requesting data and other information from the public and interested parties about the "benefits and costs" of the current standards of conduct for broker-dealers and investment advisors when providing advice to retail customers, as well as alternative approaches to the standards of conduct.
While the SEC says it is particularly interested in receiving “empirical and quantitative data and other information, all interested parties are encouraged to submit comments, including qualitative and descriptive analysis of the benefits and costs of potential approaches and guidance.”
The SEC also said that it “recognizes that retail investors are unlikely to have significant empirical and quantitative information, and welcomes any information they would like to provide.”
Industry groups were quick to weigh in on the long-awaited request. Ira Hammerman, senior managing director and general counsel for the Securities Industry and Financial Markets Association (SIFMA), said that SIFMA "welcomes the SEC’s continued focus on this important issue for individual retail investors. We’ve long supported a uniform fiduciary standard of care for brokers and investment advisors who provide personalized investment advice to individual retail investors."
Added Hammerman: "We’ve been expecting the SEC to move in such a fashion, and we believe that gathering further data and is the appropriate next step forward. We look forward to reviewing the request carefully, discussing it with our members, and submitting our comments in response.”
The Financial Planning Coalition--comprised of the Financial Planning Association, CFP Board and National Association of Personal Financial Advisors--said in a statement that the groups are "very pleased that the SEC is moving forward with this long overdue and very important consumer protection reform. We plan to use this opportunity to continue advocating for a strong, principles- based fiduciary standard that--consistent with Dodd-Frank--is no less stringent than the existing fiduciary standard under the Advisers Act.”
Dale Brown, president and CEO of the Financial Services Institute, said in a statement that FSI "applauds [the SEC] for investigating various options and seeking industry input" on the agency's fiduciary rule. "FSI has long supported a uniform fiduciary standard that increases protection for investors without limiting access to financial advice and service for Main Street Americans. We appreciate the opportunity to provide information regarding potential rules and regulations, and we will be working with our members to respond to the SEC’s request for information. We look forward to working with the SEC to create an effective and efficient fiduciary standard.”
Commenters should only submit information that they wish to make publicly available. The public comment period will remain open for 120 days following publication of the request for data and other information in the Federal Register.