More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
The Florida state Senate Banking and Insurance Committee unanimously passed SB 814, which, when signed into law, will make Florida a “notice-filing state” for branch office applications. While it pertains to Florida, the implications are nationwide, since it affects every financial services firm with affiliated financial advisors in Florida, regardless of where the firm is headquartered.
Traditionally, financial services firms would have to close pending approval of a notice filing, costing the advisor money and denying clients access to advice, according to FSI spokesman Chris Paulitz. Most typically, it would happen in the following three scenarios: When an advisor changed broker-dealer affiliation; when an advisor moved his current office address to another address, “Even if he’s moving a few blocks, from Main Street to Smith Street,” or when a firm–operating in another state–wanted to open a new branch office in Florida.
“There are only six states that are not ‘notice-filing’ states,” Paulitz says. “Of those six, the other five are not a problem; there is no delay in the filings' approvals. When we stared working with Florida, the delays were a nightmare. We’d get calls from advisors who’d say they haven’t been able to work for a month. The excuse from Florida was that a few people were out sick, or a person was away at a conference. It was unacceptable.”
FSI claims the waiting period has been reduced from weeks to four or five days, but “that’s still four or five days of lost revenue and no access to advice.”
Paulitz explains that under the new legislation, applications are automatically approved once they are filed online. There is then 30-day approval period in which they are reviewed and any required changes are made. They key is advisors can continue to operate during that period.
“It was extremely difficult for the forms to be screwed up, so there really was no reason for the delays,” he adds. “I would wonder why advisors wouldn’t just plan better to avoid having to shut down, but you can’t file the paperwork until you officially begin the move. There’s no way to get out in front of it, which is why the legislation is so important.”
Read Massachusetts Floats Criminal Background Checks for Advisors on AdvisorOne.