More On Legal & Compliancefrom The Advisor's Professional Library
- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
Those who tend toward the conservative side of the political spectrum are often forced to defend themselves against charges that they are “against” health care because they don’t approve of government’s involvement. Ditto with education; they don’t like a centralized bureaucracy in Washington that they say takes attention and resources away from the classroom. There’s something to be said for their defense, and recent responses to the fiduciary question indicate that on this issue, at least, independent broker-dealers lean decidedly right.
It’s not that they’re against a fiduciary standard (what responsible advisor in their right mind would?), it’s that the Department of Labor’s definition and requirements will add an unsustainable cost burden to what the vast majority of advisors already do.
“We asked the reps that attended our national conference if they already consider themselves to act according to a fiduciary standard,” Cambridge Investment Research CEO Eric Schwartz said at the 2013 Broker-Dealers of the Year roundtable discussion in Chicago. “Of the 900 people in the room, 100% of the hands went up.”
An illustration of the effect a fiduciary standard will have on small IRA accountholders unexpectedly presented itself that day. As he was setting up his equipment, our videographer casually remarked that he and his wife recently opened an IRA, seeded with $5,000. He didn’t know if it was a Roth or traditional, and they invested in the same stock his wife’s father has held for years.
While Investors Capital Corp.’s Tim Murphy emphasized it was important that they opened the account, he nonetheless noted, “It’s exactly this type of investor, the one who needs the most help, who will be harmed by the DOL’s rule.”
It’s nothing new, and the Financial Services Institute, whose finance committee Murphy currently chairs, has been making the same argument for years. Forget Borzi, forget investment head honchos; get our videographer in front of Congress to illustrate the actual effects of the regulators’ supposed good intentions. It should be obvious, but as is frequently the case with government involvement, obvious is anything but.