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June 16, 2017 at 09:46 AM
What’s the first logical step that the Securities and Exchange Commission should take in crafting a fiduciary rule? Regulate advisor and broker titles, advises the CFA Institute.
The Commission “can effectively begin to regain control of this [uniform fiduciary rule] issue by regulating the titles that those who provide personalized investment advice can use,” Paul Smith, president and CEO of the CFA Institute, which sponsors and oversees the Chartered Financial Analyst program and designation, told the agency in a June 13 comment letter.
Meanwhile, brokers in Nevada will now have to act as fiduciaries as of July 1 according to a newly revised law. Nevada Senate bill 383 revises the definition of financial planner “to remove the exclusions for a broker-dealer, a sales representative and an investment adviser, thereby making such persons subject to the provisions of existing law governing financial planners.”
CFA and other commenters are responding to SEC Chairman Jay Clayton’s June 1 request for comments on ways to help the agency craft possible changes to the Department of Labor’s fiduciary rule, as well as inform “possible future actions” by the agency on a fiduciary duty rulemaking of its own.
(Related: SEC Fiduciary Rule Cannot Replace DOL’s: Financial Planning Coalition)
CFA Institute is “acutely aware of the difficulty the Commission faces in attempting to draft a uniform standard for everyone providing such [fiduciary] advice, as it would likely involve numerous exemptions and carve-outs for different types of clients, transactions and situations,” Smith wrote.
Like the Commission’s Investor Advisory Committee, CFA institute recommends that the SEC require that “anyone wishing to refer to their title and/or activities as advisory in nature (e.g. ‘adviser’ or ‘advisor’) adhere to the Investment Advisers Act and the fiduciary duty implied by common law interpretation of the Act,” Smith said.
Such control of terminology “would not be new to the Advisers Act, which already expressly limits use of the term ‘investment counsel’ to those who must adhere to the Advisers Act’s requirements,” he wrote.
However, at the same time, CFA Institute believes “commission-based sales activities serve important client needs and give investors options for how they wish to conduct their investment activities.”
Whether commissioned brokers provide investment ideas or execute trades, CFA Institute supports brokers being allowed “to pursue their business activities, so long as they are clear about their roles vis-à-vis their clients.”
