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August 30, 2010 at 08:00 PM
Monday, August 30, marks the last day the Securities and Exchange Commission (SEC) officially accepts comment letters regarding the study the securities regulator is to conduct on putting brokers under a fiduciary standard of care.
Tons of letters have streamed into the agency since the SEC began accepting them on July 27. Industry groups like the Financial Planning Coalition–which includes the Financial Planning Association (FPA), CFP Board, and the National Association of Personal Financial Advisors (NAPFA)–as well as the Financial Services Institute (FSI) were making finishing touches to their comment letters with plans to submit them late in the day on August 30, while the Investment Adviser Association (IAA) and the Securities Industry and Financial Markets Association (SIFMA) submitted their comments in the early afternoon.
Kristina Fausti, director of legal and regulatory affairs at Fi360, and a former SEC staff attorney, says that the six-month study that the SEC must conduct under Dodd-Frank is, in essence, “underway internally at the SEC. Staff likely have already been monitoring and summarizing the comments for purposes of considering them in the study and preparing the final report for Congress.” Fausti says she suspects “the major work related to the study to be complete by late October or early November because the final report will need to be reviewed by various divisions and all of the Commissioners before it is sent to Congress in January.”
A couple other notable comments that have been submitted thus far have come from Nancy Lininger, a compliance consultant with the Consortium in California, and Harold Evensky, president of Evensky & Katz Wealth Management in Coral Gables, Florida.
Lininger looks into her crystal ball and tells the SEC in her comment letter that she foresees a future with broker/dealers and RIAs under one regulatory regime. “No longer will we have the broker/dealer and registered investment adviser industries. There will be one registration for firms–one fee–one filing. One registration for reps–one fee–one grand slam exam; [and] one full disclosure document used by all to replace the Form ADV,” Lininger says. “Wealth management, life planning, financial planning, asset management, or simple buy and sell securities recommendations will be done under one roof. There will be a choice of fee structures, based on client suitability.”
Lininger goes to say that whichever standard an advisor adheres to– fiduciary or suitability–”it should be consistent for B-Ds and RIAs; but the label is just a label. There will be legal consequences for those that don’t follow the rules.” She argues that broker-dealers must adhere to “rules that are too constrictive, which are bound to get them in trouble with the regulators. When there is so much minutia to know and follow, you are bound to step out of bounds.” But RIAs, she says, “don’t have enough rules
and oversight to give them sufficient guidance as to what should or should not be done.” Therefore, she says, “the rules and regulatory oversight [for BDs and RIAs] must meet in the middle.”
