More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
Securities and Exchange Commission Chairwoman Mary Jo White said in early October 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 [a rule proposal], it’s very important to work on and resolve where we are going on it.”
Indeed, former SEC Chairwoman Mary Schapiro, who struggled for years to get a fiduciary duty rule passed during her term, told IA that she’s confident that “progress can be made on the uniform fiduciary duty” rule.
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 IA 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, Roper said 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.”
The subcommittee “appreciates that Chair White views this issue as a priority and hopes 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 mid-October meeting, but that was 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.”