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WealthManagerWeb Exclusive: Fiduciary Expert Ron Rhoades on the B/D Exemption

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Wealth Manager talked about this with fiduciary expert Ron Rhoades, in mid-March and again in May. Rhoades is an attorney, and director of research, chief compliance officer and private wealth manager for Joseph Capital Management, LLC. The exemption allows broker/dealers to provide advice as long as the advice is, according to the SEC, “solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor.”

There’s a great deal of debate going on about whether broker/dealers should put their clients’ interests ahead of their own if they provide advice. If they have discretion over client assets, of course, they must be fiduciaries, but what about when they provide similar advisory services to investment advisors?

During the week of May 10, the Senate will debate amendments to its version of financial reforms–the Restoring American Financial Stability Act (S.3217). The House passed its version of reforms in December with a requirement extending fiduciary duty for broker/dealers who provide advice to investors. The Senate version originally had even farther-reaching fiduciary requirements, but these was stripped out in lieu of a “study” to determine whether broker/dealers should be required to put investors’ interests ahead of their own. Now, at least two amendments to reinstate the fiduciary requirement have been filed, with more possible.

One way to, in practical terms, extend the fiduciary standard to providers or advice is to eliminate the broker/dealer exemption. Hear the exclusive Podcast: “Ron Rhoades: Whatever Happened with the B/D Exemption?

Comments? Please send them to [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.


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