More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
Mary Schapiro, chairman of the Securities and Exchange Commission (SEC), said Friday that the agency will turn its attention to crafting a fiduciary duty rule for brokers, harmonization of advisor and broker rules, as well as revisions to mutual fund distribution fees under rule 12b-1 after July 21, the date marking the one-year anniversary of the Dodd-Frank Act.
Schapiro, speaking at the Investment Company Institute’s (ICI) annual conference in Washington, said that the SEC will focus on regulatory changes concerning mutual funds, particularly 12b-1 fee reform, “in tandem” with the investment advisor/broker dealer reform issues.
The SEC received more than 2,400 comments on its proposed revisions to Rule 12b-1, which Schapiro said raised “some important issues regarding 401(k) plans, disclosure issues, and creat[ing] competitive pricing that benefits investors.”
After July 21, Schapiro said, the agency will “put together a rulemaking team” to craft a rule for putting brokers under the same fiduciary standard as advisors. “We continue to seek comment” on both a fiduciary duty rule for brokers as well as harmonization, Schapiro said, adding that she has also asked SEC economists to analyze economic data that is available regarding fiduciary duty to help inform the rulemaking. While the SEC, she said, is focused on putting “in place a fiduciary duty [for brokers] that is no less stringent” than the duty under the Investment Adviser Act, the rule, she stressed must “not limit investor choice.”
As for a self regulatory organization (SRO) for advisors, which the SEC was required to study under Section 914 of Dodd-Frank, Schapiro said that while the Commission continues to explore the SRO issue, all three options put forth in the SEC’s study to Congress—one or more SROs, extension of FINRA oversight over advisors, or imposing user fees to fund advisor exams—“all require legislation to move forward.”