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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Standard of care’

SEC Unprepared to Implement the Fiduciary Standard for Broker-Dealers

Posted by William Byrnes on March 28, 2011


Broker-dealers will be subject to a fiduciary standard of care no earlier than the second half of 2012, predicts Richard Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (“FINRA”).  Mr. Ketchum’s remarks come a week after SEC chairman Mary Schapiro said that the SEC has “a lot of work to do” before putting “pen to paper” and writing the fiduciary standard rules.

Causes of the delay were hinted at by a pair of reports issued by the SEC last month, one of which concluded that broker-dealers and registered investment advisers (“RIA”) should be subject to the same fiduciary standard of care. The other report provided recommendations for improving the examination of investment advisors, concluding that a Self-Regulatory Organization (“SRO”) should be appointed to conduct examinations of investment advisors. An SRO is a private organization that is granted some regulatory authority over a particular industry. SROs are typically funded by member user fees.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the fiduciary standard in Advisor’s Journal, see SEC Fiduciary Standard Study Answers Few Questions (CC 11-25)Study Finds that Universal Fiduciary Standard Will Hurt Investors (CC 10-97) and What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10 40)

Your questions and comments are always welcome. Please post them below or call the Panel of Experts.

 

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SEC Fiduciary Standard Study Answers Few Questions

Posted by William Byrnes on March 13, 2011


The SEC has finally released its anxiously awaited study of whether a fiduciary standard of care should be applied to broker-dealers; but, like the study on adviser examinations, the report leaves as many questions as it answers. The fiduciary standard study recommends that brokers be held to the same standard as register investment advisers (RIAs).  Although the study doesn’t provide details on how the switch to the fiduciary standard will be implemented, there are hints as to what brokers can expect.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the fiduciary standard in Advisor’s Journal, see Study Finds that Universal Fiduciary Standard Will Hurt Investors (CC 10-97) and What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10 40).  Comments are welcome below.

 

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New Dodd-Frank Study Calls for Stringent Standards

Posted by William Byrnes on February 21, 2011


The Securities and Exchange Commission (SEC) submitted to Congress a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers — no less stringent than currently applied to investment advisers under the Investment Advisers Act of 1940– when those financial professionals provide personalized investment advice about securities to retail investors.

Section 913 of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required SEC to conduct a study to evaluate:

  • The effectiveness of existing legal or regulatory standards of care (imposed by current authorities) for providing personalized investment advice and recommendations about securities to retail customers; and
  • Whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for providing personalized investment advice about securities to such customers that should be addressed by rule or statute.

In the study, the SEC notes that investment advisers and broker-dealers are regulated extensively under different regulatory regimes.  But, the study claims, many retail investors do not understand and are confused by the roles played by investment advisers and broker-dealers.  The study finds that “many investors are also confused by the standards of care that apply to investment advisers and broker-dealers” when providing personalized investment advice about securities.  Read the analysis at http://www.advisorfyi.com/2011/01/new-dodd-frank-study-calls-for-stringent-standards/

 

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