More On Legal & Compliancefrom The Advisor's Professional Library
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
How do Pershing’s customers—specifically independent broker-dealers who clear at Pershing and RIAs who custody with Pershing Advisor Solutions—benefit from the company’s worldwide footprint?
Pershing CEO Brian Shea (left) answered that question in an interview Wednesday by noting first that “the world economic scene is being restructured” as we speak, and said that the economices of emerging market nations may, for the first time, “pull developed nations out of recession.”
Furthermore, because of the deleveraging in developed nations, especially in Europe, pressure is being placed on growth rates, he said. While Shea wouldn’t comment on the wisdom of the austerity measures now being painfully put into place in nations like Greece, he did say that “spending discipline” was appropriate.
While many of Pershing’s affiliated advisors remain U.S.-centric in their investing strategies, Shea said that many of its customers are also global, and mentioned that Pershing is building on its international expertise by successfully building out the IFA (independent financial advisor) channel in the U.K., where he said Mark Tibergien, CEO of Pershing Advisor Solutions, “has been of great value.”
“We execute, clear and report in 65 countries” around the world, Shea pointed out. As a further example of how advisors and their end clients are benefiting from Pershing’s global operations, he said that Lockwood, part of Pershing’s Managed Account Solutions, is now working with BNY Mellon’s investment management unit to build separately managed accounts that invest globally.
Turning to regulation and the current debate on everything from an advisor SRO to a fiduciary standard for all professional advice givers, Shea first pointed out that while the current regulatory system is a “patchwork quilt” and that if “you were starting from scratch today, there’s no way you would build it as it is,” efforts like Dodd-Frank to reform the system are important, but cautioned that “no regulatory system can reduce risk 100%.”
Shea said that while he could make a strong argument supporting both sides in the debate over a fiduciary standard of care, the needs of the investor are being overlooked. “We’re talking to people, quietly,” on all sides of the debate to retreat from “too much of a focus on the business model” and to place that focus instead on safeguarding investors.