More On Legal & Compliancefrom The Advisor's Professional Library
- Code of Ethics Rule The Code of Ethics Rule, found in Rule 204A-1, uses severe consequences for violation to help ensure investment advisors will do the right thing.
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
Denise Voigt Crawford, Texas Securities Commissioner and president of the North American Securities Administrators Association (NASAA), said during the conference call that the House version of reform, which establishes a fiduciary duty and calls for harmonization of regulations for B/Ds and advisors, "will align the legal amendments of broker/dealers with the expectations of their clients. There is an assumption by clients that their interests are first when seeking investment advice."
It looks as though Senator Tim Johnson (D-South Dakota) is the major hurdle in getting the House fiduciary language adopted. Johnson, along with Senator Michael Crapo (R-Idaho), crafted the Senate provision calling for the SEC study, and both serve as Senate conferees.
"Because the Senate bill serves as the base text for the conference, the legislation will need to be amended if the House's more pro-investor approach is to prevail," Roper of CFA noted during the conference call. And Johnson, she said, "is in the position to caste a crucial vote on the [fiduciary] issue."
Johnson is also expected to replace Senator Christopher Dodd (D-Connecticut) as chairman of the Senate Banking Committee when Dodd retires early next year. With Johnson as head of Senate Banking, Roper said that the options of "getting a legislative fix" on the fiduciary issue, assuming the House language is not adopted, would not look good.
House Financial Services Chairman Barney Frank (D-Massachusetts), who serves as the chairman of the conference committee, released on Tuesday, June 15, on behalf of the House conferees, the House offer on investor protection, which includes the fiduciary issue, along with regulatory improvements for the SEC.