Uniform Fiduciary Duty Standard

Google searches for “fiduciary duty” have spiked recently, and taking into account the changes that are likely coming, it is not surprising. A fiduciary duty is viewed as the highest standard of customer care and includes both a duty of care and duty of loyalty. While investment advisers are already subject to such a standard, brokers adhere to a suitability standard. The SEC Chairman has stated that the SEC will develop a uniform fiduciary duty for all retail investment advice, which will include a fiduciary duty for brokers. The SEC’s statement is just the beginning of what will likely be a lengthy process. It is also worth noting that the Department of Labor has proposed a separate fiduciary rule that would raise the standard for those providing advice on retirement accounts, including brokers. The DOL’s final proposed fiduciary rule could be released as early as April.

Third Party Compliance Reviews

Since Congress has made it clear that the SEC will not be receiving a significant budget increase anytime soon, the SEC has been forced to consider alternative means of expanding its oversight of investment advisers. The SEC has mentioned a third party compliance review program and is expected to issue a proposed rule in the near future. The program would call for all federally registered investment advisers to hire independent third parties to perform compliance reviews of their firms. It is likely that the SEC will set standards for such independent third-party compliance reviews, possibly similar to those used for independent audits of financial statements.

Reminders

• Form ADV must be updated by March 30, 2016.
• Form PF filing deadlines are approaching. Carefully review the definitions and instructions carefully to determine the amount of “private fund assets” and “hedge fund assets.”
• A recently enacted highway bill, the FAST Act, provides an exception to the annual privacy notice distribution requirement, if certain criteria are met.
• The SEC will be holding a national compliance outreach seminar for investment companies and investment advisers on April 19th, a live webcast will be available on the SEC’s website.