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- 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.
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
Securities and Exchange Commission Chairwoman Mary Jo White said Wednesday that developing a fiduciary duty rule for brokers remains a “major focus of our efforts.”
After her remarks at the Securities Enforcement Forum in Washington, White told reporters that while she couldn’t predict “time-wise when we reach it [a rule proposal], it’s very important to work on and resolve where we are going on it.”
In hopes of pushing the SEC’s fiduciary rulemaking along, a subcommittee of the agency’s Investor Advisory Committee has drafted a proposal that would put brokers under fiduciary standards that advisors adhere to.
Under the draft proposal, the subcommittee says that a fiduciary duty for investment advice should include, “first and foremost, an enforceable, principles-based obligation to act in the best interest of the customer.”
In approaching this issue, the subcommittee says that the SEC’s goal “should be to eliminate the regulatory gap that allows broker-dealers to offer investment advice without being subject to the same fiduciary duty as other investment advisors but not to eliminate the ability of broker-dealers to offer transaction-specific advice compensated through transaction-based payments.”
Barbara Roper, director of consumer protection for the Consumer Federation of America, who chairs the SEC’s Investor as Purchaser Subcommittee that issued the proposal, told ThinkAdvisor that the subcommittee’s hope was that “by weighing in early in the [fiduciary rulemaking] process, we can help to shape the form that commission rulemaking takes.”
In reaction to White's comments on Wednesday, Roper told ThinkAdvisor that the subcommittee "recognizes that the Commission has a very full agenda of mandated rules under both Dodd-Frank and the JOBS Act, so discretionary rules have to fight for their share of a very limited bandwidth."
That said, however, the subcommittee has "long maintained that raising the standard of care for investment advice by brokers is among the most important steps the Commission can take to protect the interests of average, unsophisticated investors."
The subcommittee "appreciates that Chair White views this issue as a priority and hope that the Commission can move forward with a strong, pro-investor rule in the not too distant future," Roper added.
The subcommittee’s proposal was scheduled to come up for a vote at the Investor Advisor Committee’s Thursday meeting, but that has been postponed because of the government shutdown. Roper said that "assuming that [the proposal] is eventually adopted by the full committee, perhaps our recommendation can help to provide further support for Commission action."
Roper said a date for a meeting of the full committee remains uncertain.
Check out Matrix Warns: Brush Up on IRA Business Models Ahead of Fiduciary Rule on ThinkAdvisor.