More On Legal & Compliance
from The Advisor's Professional Library- Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs’ advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients’ privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
Craig Hoffman, ASPPA’s general counsel and director of regulatory affairs, sat with AdvisorOne on Sunday afternoon for an exclusive interview at the organization’s 401(k) summit in New Orleans. Hoffman provided an update on ASPPA’s positions on the fiduciary standard of care, the IRA rollover rule and tax reform.
“ASPPA has continued to support the updating of the fiduciary standard of care,” Hoffman (left) said. “Yes, a ruling has now been delayed, but that is not really an issue. The Department of Labor is desirous of getting it right. Phyllis Borzi has said it will now happen around the end of June. We think that’s optimistic.”
The issue, he said, is that the DOL is seeking specific data from financial services companies that the companies say do not exist, so it will be hard to adhere to the June timeline.
“Then we get into election season,” he added. "Nothing will probably happen until that is over.”
The organization is very concerned specifically about the inclusion of IRAs in the fiduciary proposal. Hoffman said the DOL is re-proposing the rule, and will ask for further comments.
“There are already prohibited transactions under IRS rules,” he explained. “The problem is there is no enforcement mechanism. If this falls under the same rules, what you will have is good guys trying to comply, and bad guys trying to flaut the rule. It will be easier for them to get away with it because of that lack of enforcement.”
The last items addressed by Hoffman was the broader issues of debt reduction and tax reform. He said ASPPA is worried about savings incentives that might be weakened by the president’s budget, in an attempt at deficit reduction.
“The most recent budget [Obama] submitted included a return to a Reagan-era marginal tax deduction capped at 28%. For high income earners, that means their money will be taxed on the way in and on the way out [of a savings plan]. For small businesses in particular, the tax benefits are a strong motivating factor for offering a plan.”
Hoffman quoted an ASPPA info graph that found 74% of workers participate in a savings and investment plan offered by their employer. When a plan is not offered by an employer, less than 5% of workers save for retirement.
“The point we’re making here is that it is extremely important to preserve the tax deduction benefits for the decision maker, meaning the employer, who offers the plan.
