More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- 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.
Fiduciary advocates have once again christened September as 'Fiduciary September', and are gearing up to underscore the importance of requiring that brokers adhere to a fiduciary standard to the Securities and Exchange Commission and Congress.
Knut Rostad, president of the Institute for the Fiduciary Standard, says the fiduciary advocates will stress throughout the month the “enormous responsibility” the SEC has as it considers revising the meaning of “advice” under federal securities laws.
Rostad told ThinkAdvisor on Tuesday that as the SEC moves forward in crafting a fiduciary rule for brokers — even as the commission absorbs the recent addition of two new members — he predicts that while “fiduciary duties will not be outright eliminated, a middle ground [between the advisory and brokerage industries] will emerge, or there will be a long stall.”
Fiduciary September also comes a month before the Department of Labor is scheduled to repropose its rule revising the definition of fiduciary under the Employee Retirement Income Security Act (ERISA).
Rostad is spearheading, along with other industry officials like Vanguard founder John Bogle, a number of Fiduciary September initiatives, including:
—A Sept. 5 conference call on 401(k) fees and expenses with industry experts Jeffrey Turner of DOL's Employees Benefits Security Administration; John Rekenthaler of Morningstar; Edward Lynch of Fiduciary Plan Governance; and Kate McBride, Institute for the Fiduciary Standard
—The release on Sept. 9 of a white paper on The Six Core Fiduciary Duties the Institute identifies as essential to the fiduciary standard
—Meetings with members of Congress as well as with Treasury and the SEC on Sept. 12 and 24
—Rostad, Bogle and Boston University law professor Tamar Frankel, most revered for her teachings on, and knowledge of, fiduciary law, will meet with SEC Chairwoman Mary Jo White on Oct. 1.
“The institute will continue to underscore the indispensable role of fiduciary principles in preserving the trust and confidence of retail investors in the capital markets,” said Rostad (left), in a statement. “The institute will also offer scrutiny of the basic implausibility of the brokerage industry argument against fiduciary duties.”
SEC’s White told lawmakers in late July that the agency was “focused” on completing a fiduciary duty rule proposal and that “it’s important for me to get to wherever we are going on that [rulemaking] as quickly as we can.”
However, quick progress on a rulemaking is sure to be stymied by the arrival in late August of the two new SEC Commissioners, Kara Stein and Michael Piwowar. The SEC, under its new leadership, “has an enormous responsibility as it considers revising the meaning of ‘advice’ for tens of millions of retail investors,” says Rostad.
Check out SEC Gets an Earful From Advisors on Fiduciary Standard on ThinkAdvisor.