More On Legal & Compliancefrom The Advisor's Professional Library
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
- 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.
The Securities and Exchange Commission will let the Department of Labor move first in releasing its fiduciary redraft, which DOL recently said won’t come until next August, two prominent industry officials predicted Thursday.
“The SEC doesn’t want to go first” in releasing a fiduciary rule, Mary Wallace, senior legislative representative for AARP, said during a panel discussion on fiduciary duty at the Consumer Federation of America’s financial services conference in Washington.
Indeed, Mercer Bullard, founder of Fund Democracy and associate professor at the University of Mississippi School of Law, who sat on the panel with Wallace, told ThinkAdvisor before his comments that he believes Perez has decided to revisit the DOL’s reproposal “from the ground up” in order to gain industry support for the rule.
Wallace and Bullard's predictions run counter to what a bill that passed the full House in late October would require the DOL to do, which is wait to repropose its rule until 60 days after the SEC issues its fiduciary proposal under Section 913 of the Dodd-Frank Act. The Senate Banking Committee, however, has “no interest” in taking up such legislation.
Labor Secretary Thomas Perez and his new deputy assistant secretary Judy Mares are “energized” about the DOL’s rule to amend the definition of fiduciary under the Employee Retirement Income Security Act, Wallace said. Perez has “been doing a lot of pushback” with congressional opponents of DOL’s reproposed rule, she said.
DOL’s rule will be a “stronger rule,” and it will “bolster” the SEC’s rule, Wallace told ThinkAdvisor. DOL is “also more prepared” to release its reproposal, she added.
Bullard agreed that the SEC would wait to release its fiduciary rule for brokers until after the DOL released its fiduciary redraft, so that DOL “could take the heat.”
Perez and Mares, who joined DOL in October and hails from the retirement industry, will be getting more feedback from the industry, Wallace said.
The SEC and DOL recently filed their semiannual regulatory agendas with the Office of Management and Budget. The SEC listed its personalized investment advice standard of conduct (fiduciary) rule as a “long-term agenda item" with the “next action” on the fiduciary rule “undetermined.” The DOL said its fiduciary redraft would come in August.
Bullard was doubtful that the SEC would actually release a fiduciary rule proposal for brokers in the New Year, stating that former SEC Chairwoman Mary Schapiro said coming out with a fiduciary duty rule “was a high priority for her for a year; we’re hearing the same thing” from current SEC Chairwoman Mary Jo White.
But Wallace was optimistic that the SEC would issue a proposal. “I think we will get both rules, but DOL will go first.”
Ira Hammerman, general counsel for the Securities Industry and Financial Markets Association, who sat on the panel with Wallace and Bullard, predicted that the SEC’s release of a fiduciary rule proposal would be “further back in the queue” from the many rules mandated under Dodd-Frank.
Check out You Can Leave Your Hat(s) On: Two Fiduciary Standards? on ThinkAdvisor.