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NAFA Speaker Says Impartial Conduct Standards Have Staying Power

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Scott McCleskey today told financial services distributors that they should prepare for the likelihood that some form of the fiduciary standard will persist, even if the current version goes away.

Policymakers in Washington may eliminate the Department of Labor’s current fiduciary rule, with its provision encouraging angry retirement investors to go to court, but the principle behind the rule has staying power, McCleskey said during a fiduciary rule compliance webinar organized by the National Association for Fixed Annuities.

“What will always be there will be these impartial conduct standards,” McCleskey said.

(Related: Courts Will Not View DOL Fiduciary Rule Repeal Favorably: Borzi)

McCleskey is senior vice president at Eukleia Training Ltd.

He has dealt with tougher challenges than financial services sales and marketing rules: Before he went into the financial services compliance sector, he served in the U.S. Army as a combat engineer and as a tactical military officer. He has also been a special agent with the FBI.

He has also worked in compliance and regulatory policy at organizations such as Moody’s and at a European stock exchange.

He advised listeners to take the time to develop thorough, thoughtful compliance policies and procedures, to show their firms are making a serious effort to identify, manage and disclose situations that could lead to conflicts of interest, or even failures to adhere to impartial conduct standards.

A company should make sure to put its conduct training standards in the policy, and talk about compensation, McCleskey said.

McCleskey encouraged listeners to put disclosures about possible compensation conflicts in an easy-to-see place.

“Don’t bury these disclosures,” he said.

One reason for regulators’ current approach to market conduct standards is their sense that companies were giving important disclaimers deep in documents that ordinary investors would never read, he said.

McCleskey also recommended taking the time to name someone as the party responsible for fiduciary rule compliance.

Regulators may not punish a firm for failing to name a responsible party, but, naming a responsible individual “really pins this on somebody,” he said. “This should be part of their performance goals.”

Related: Sticking to DOL Fiduciary Deadline Is ‘Right Move,’ Says fi360’s Aikin 

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