More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
The House Financial Services Committee plans to mark up a bill introduced by Rep. Ann Wagner, R-Mo., on Wednesday that would require the Department of Labor to wait to publish its fiduciary rule for 60 days after the Securities and Exchange Commission releases its fiduciary rule proposal.
The bill, the Retail Investor Protection Act, is a “significantly revised” version of a discussion draft that Wagner released in late May, says Neil Simon, vice president for government relations at the Investment Adviser Association in Washington.
That proposal would have required the SEC to coordinate with other federal agencies before issuing any broker-dealer fiduciary rule, though it did not specifically name the DOL as the new one does.
Industry officials said that the first draft would have been of “little consequence” as an effort to slow the progress of the SEC and DOL in crafting their fiduciary rules.
Lee Covington, IRI’s senior vice president and general counsel, told AdvisorOne Tuesday that “Our members support the SEC acting first so DOL will know what the other primary regulators are doing in the [fiduciary] area.”
Also, the initial draft was not referred to any committee of jurisdiction. This bill, however, is being jointly referred to the House Education and the Workforce Committee.
Duane Thompson, senior policy analyst at fi360, adds that if the bill passes both committees and the full House "it would likely face similar referrals to two different Senate committees (Banking and Health/Education/Labor and Pensions), making it that much easier to block on the Senate side."
Thompson pointed to comments made by House Capital Markets Subcommittee Chairman Scott Garrett, R-N.J., who was quoted as saying the best way to “improve” Dodd-Frank is through a piecemeal legislative approach rather than attempting to repeal the entire law, which he acknowledged is not going to happen. "So again, [Wagner's bill is] really just a shot over the bows of both agencies to go slow, and reminding them—just in case they had forgotten—that Congress is watching."
Simon of IAA also says the revised bill “ratchets up” the dicussion draft’s requirement that the SEC, before issuing any fiduciary proposal, "find that the status quo demonstrates economic harm to investors and that the new rule will remedy this economic harm," to say that “customers are being systematically harmed or disadvantaged.”
But Simon says Wagner responded to advisory industry concerns by making the provision that would have required the SEC to link fiduciary duty and harmonization in one rule “less threatening” in her new bill. The new version states that the SEC, in its fiduciary rule, “shall consider the differences in the registration, supervision, and examination requirements applicable to brokers, dealers and investment advisors,” which Simon says is “far less objectionable.”
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