More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Lawmakers’ request that the Securities and Exchange Commission and Department of Labor collaborate on their fiduciary rulemakings is Congress’ way of telling the DOL “to step aside” and let the SEC issue its rule first, as the broker-dealer and insurance industries believe the securities regulator would issue a rule more to their liking, Barbara Roper, director of investor protection at the Consumer Federation of America, said Tuesday.
“It’s absurd to suggest that DOL should step aside to wait and see” if the SEC moves forward with its fiduciary rulemaking, said Roper at a CFA event held in Washington called The Threat to Retirement Security: When Salespeople Call Themselves ‘Advisers.'
“I’m troubled by suggestions that the DOL needs to wait longer,” agreed Shaun O’Brien, assistant director of public policy for the AFL-CIO, as update of the Employee Retirement Income Security Act is “long overdue.” ERISA, he said, was created in 1974 and “falls far short of the authority needed to protect investors” in today’s environment.
Lisa Donner, executive director of Americans for Financial Reform, added that Congress’ repeated requests for collaboration between the two regulators on their rules “feels like it’s a tactic, and is not grounded in either regulatory or statutory sense.”
Indeed, during the event, presented by the AARP, CFA and Americans for Financial Reform, Roper cited the “challenge” in “keeping the two [agencies’ fiduciary] efforts separate.” Why the two rules are talked about in tandem, she said, is that both agencies “are, in their own way, attempting to close regulatory loopholes” when it comes to investment advice. Yet, the rules need to stay separate, she said, as each agency “has a distinct role to play” and “each also has distinct areas of jurisdiction.” While there is “some overlap” in the agencies’ jurisdictions, the two “implement different laws and they were written differently intentionally.”
Labor Secretary Thomas Perez has stated that a redraft of DOL’s fiduciary rulemaking will be coming in the months ahead, with Phyllis Borzi, assistant director of DOL’s Employee Benefits Security Administration stating the redraft could come before August or after.
SEC Chairwoman May Jo White has said the agency will make a “threshold decision” this year on whether to impose a uniform fiduciary duty, telling ThinkAdvisor in a recent interview that she’s “actively in discussions with the staff” on “potential options” available to the agency that could be used in drafting a fiduciary rule.
Roper said at the event that an SEC rulemaking that fails to require “everyone giving investment advice” to be held to a fiduciary standard would be unacceptable. She added, however, that one improvement the SEC could make to ensure proper advice is given to retail investors is to develop a pre-engagement disclosure document, which Section 913 of the Dodd-Frank Act required the agency to do.
Check out Barbara Roper, Investor Watchdog: The 2014 IA 25 Profile on ThinkAdvisor.