More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- 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.
This is Dale Brown’s seventh appearance on the IA 25. Read his extended profiles from 2012 and 2011. Click here to view the complete list and Special Report schedule for extended profiles for each of the 2013 IA 25 honorees.
When reminded that this is the seventh year that he’s been named to the IA 25, Dale Brown was quick to give kudos to his entire team, noting that the Financial Services Institute’s success doesn’t hinge on his abilities alone. FSI’s staff, Brown said, “sets priorities and makes sure those priorities are relevant to our members.”
Indeed, since moving FSI’s headquarters from Atlanta to Washington three years ago, FSI’s membership has more than doubled—jumping from 15,000 advisor members to 35,000 today. The trade group’s budget during that time has shot up as well, going from $3.5 million to more than $7 million. FSI’s broker-dealer members now total 107.
Brown said one of FSI’s top goals this year is bringing more advisor members on board and “getting them personally involved in our advocacy mission.”
As to FSI’s other priorities, Brown said the trade group has three: opposing the Department of Labor’s fiduciary rule reproposal, which is due out in July; the “continued fight” regarding advisors’ independent contractor status, with proposals at both the federal and state level that will make it more difficult for companies to classify workers as independent contractors going forward; and leveraging FSI’s existing resources to make the Financial Industry Regulatory Authority “a more effective regulator.”
Said Brown: FSI is “working on the right issues; it’s challenging, but we’re getting results.”
As to DOL’s efforts to redefine the term fiduciary under ERISA, Brown has said DOL’s proposal “would suddenly hold broker-dealers who work with company-sponsored retirement plans and IRAs to a different standard of oversight, one that would not be aligned with Main Street American investors’ needs.” This move, he said, “would eliminate commissions as a source of broker-dealer compensation for such accounts, potentially pricing out the majority of American IRA holders from affordable financial advice.”
Under the DOL proposal, “many independent financial advisors might be forced to exit the IRA and company-sponsored retirement plan businesses, rather than face the onerous costs of restructuring their service offerings to suit the new rule.”
Since launching FSI nine years ago, Brown said the group has maintained a constructive dialogue with FINRA so that it can “lighten the [regulatory] burden on our members,” as they say their chief concern is the “day-to-day cost, burden and complexity of dealing with FINRA.”
Just as the SEC’s exam process needs improving, so, too, does FINRA’s, Brown said. Since Richard Ketchum, FINRA’s CEO, “has been on board, we have developed a good relationship” with FINRA. Noting that FINRA, for now, recognizes there’s no “political support” for creating a self-regulatory organization to help examine advisors, Brown also doesn’t see “any significant support” for Rep. Maxine Waters’ bill—which she reintroduced in April--that would allow the SEC to assess user fees for advisor exams.
But while FINRA will forgo, for now, pushing to become the SRO for advisors, “I don’t think they’ve dropped it as an ultimate goal,” Brown said.