|
|
Compliance
|
Don Trone Weighs In On Whether CFPs Who Work For Broker/Dealers Can Adhere to CFP Board’s Fiduciary Standard |
|
Monday, October 01, 2012 18:03
|
|
Tags: fiduciaries
Don Trone, widely considered the founding father of the fiduciary movement among private wealth advisors, is known for saying what he thinks. So I asked his opinion about the very public disagreement between Kevin Keller, the head of the CFP Board, and Allan Roth, a CFP and blogger for The Wall Street Journal. Trone, the founder and CEO of 3ethos, which trains fiduciaries, did not hold back. This Website Is For Financial Professionals Only
“There are three elements that stand out,” says Trone. First, he says, whenever a professional is licensed to use a professional designation, he is implicitly asking the public to put more trust in him than someone with no designation, which gives rise under common law to a fiduciary obligation.
Secondly, since July 1, 2008, CFP certificants have been subject to a fiduciary standard. “I’ve been told that there is language which permits the certificant to opt out of the fiduciary standard if certain conditions exist,” Trone says. “On the other hand, you have a statement from Kevin Keller which appeared recently on a blog: ‘The CFP Board is a 501(c)(3) nonprofit whose mission is to benefit the public and we take that charge seriously by being the only financial planning designation that requires and enforces a fiduciary standard of care.’
“Kevin doesn’t mention any exceptions, so I guess we can assume the fiduciary standard applies to all CFP certificants at all times,” says Trone.
Lastly, the CFP Board is publicly advocating a fiduciary standard; in its advocacy, it doesn’t mention allowing CFPs to opt out, Trone says.
When you consider these three elements collectively, Trone says you must come to the conclusion that the fiduciary standard applies to all CFP certificants, no matter whether that are registered reps or investment adviser reps. “Which brings up the logical follow-on question,” says Trone. “What is the CFP Board’s fiduciary standard?”
A standard, says Trone, is defined by “principles and practices, and often times includes safe harbor procedures to insulate a professional or an organization from the unintended consequences of applying a particular standard.”
The CFP Board has done an excellent job of communicating the principles of a fiduciary standard — that a client’s interest comes first — but, says Trone, “I don’t believe they have published anything on the associated practices.”
On behalf of the FPA, Trone says he took a stab at aligning fiduciary practices with the six-step financial planning process and, in turn, the CFP Board’s practice standards. “Unfortunately, we can’t get the CFP Board to approve the work for CE because it is considered practice management, has proprietary content, and references leadership behaviors,” says Trone.
(By the way, if any CFP certificant would like a copy of the “banned-in-Boston” fiduciary standard Trone prepared for financial planners,
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
. He’ll send it to you. “It will arrive,” he jokes, “in a brown wrapper.”
On a related note, Trone says advisors didn’t score very well in implementing practices associated with a fiduciary standard according to the 2012 Fiduciary Impact Survey. Yes, they scored well on the principles, but not the practices, Trone says.
Financial planners, as a practice area, didn’t score as well as other practices areas, such as retirement advisors and wealth managers. “To the CFP Board’s defense, we did not ask respondents to identify their professional designations, so there is no way of knowing whether CFP certificants would have scored higher,” Trone says. “Next year (this will be an annual survey) we will include designations so we’ll be able to isolate the scores of CFPs vs. other designations and practice areas.”
As for whether those who hold the CFP and who work for a brokerage firm could comply with the CFP Board’s fiduciary standard, Trone says the answer is yes, but. “The issue for the organization is whether the certificant’s fiduciary acknowledgement might blow a fiduciary circuit breaker elsewhere in the factory,” Trone says. “This is the reason why a fiduciary safe harbor is so critical, and why the B/Ds are not going to budge on a uniform fiduciary standard until they get one – and I can’t blame them. There are too many unknowns associated with adopting a uniform standard.”
So, this is what Trone would propose as a fiduciary safe harbor procedure:
- The firm must define minimum qualifications (in terms of experience, licensing and training) for advisors who wish to serve in a fiduciary capacity;
- The advisor must accept and acknowledge their fiduciary status in writing;
- When serving in a fiduciary capacity, the advisor must agree to only utilize investment products, data bases, software and technology approved by the firm;
- The advisor must agree to maintain records which demonstrate the advisor's procedural prudence (the details of the advisor's decision-making process); and
- The activities of the advisor must be monitored by the firm.
Read more...
|
|
|
Another Advisor Claiming To Be A Fiduciary Accused Of Defrauding Investors |
|
Sunday, September 30, 2012 21:50
|
|
Tags: compliance | fiduciaries | fraud | RIA compliance | sec Another RIA and its owner that were recently charged by the Securities and Exchange Commission with running a Ponzi scheme made the fiduciary obligation to clients the central focus of its marketing.
This Website Is For Financial Professionals Only
Summit Wealth Management Inc., which claimed to manage more than $500 million and 2,200 client accounts, placed the following statement in the second of its home page in bold text: “We acknowledge a fiduciary responsibility to you, the client, and as such, we pledge to place your needs first in all that we do.”
According to the SEC complaint, Summit’s founder and CEO, Angelo Alleca, created Summit Fund, a private fund, no later than 2004 and sold interests in Summit Fund to the advisory clients of Summit Wealth. Investors in Summit Fund were told that it would operate as a fund-of-funds. In or around 2006, although the investors in Summit Fund had been told that the fund would operate as a fund-of-funds, Alleca began actively trading securities in Summit Fund and incurred substantial losses.”
Alleca and RIA, the SEC says, concealed the losses from the investors. Around 2006 through 2008, Alleca started at least two additional private funds, called Asset Fund and Credit Fund, to raise capital so that he could cover up the losses that he had incurred in Summit Fund.
“Alleca's plan to cover up the losses did not work, however, in that the successive funds incurred further losses,” the SEC complaint says. “Summit Wealth issued such false account statements to approximately 200 of its advisory clients, and the Alleca-Controlled Funds issued such false account statements to the investors in the respective funds. Alleca caused some of the monies that were invested in Asset Fund and Credit Fund to be misappropriated in order to satisfy requests by certain investors in the Summit Fund for redemptions of some or all of their interests in the Summit Fund.”
Efforts to contact Alleca for his response to the allegations were unsuccessful.
While Summit’s website is no longer live on the Web, according to an archive of it website in November 2010, the firm has six offices, including locations in Beverly Hills, Naples, and Chicago as well as Atlanta. None of the firm’s other advisors, which include a CPA, CFP. NAPFA-Registered Adviser and other professionals, have been charged with any wrongdoing. (I know individuals connected to this firm and it's hard to believe they'd ever knowingly be involved in a fraud.)
While almost unheard of a decade ago, fraud allegations against fee-only advisors claiming to be fiduciaries has become common in the last few years, as the government considers creating a new financial advice regulatory system and doing business as an RIA has become more popular.
Read more...
|
|
FINRA Considers Proposal Mandating Greater Consumer Access To BrokerCheck Through Web Links |
|
Monday, September 24, 2012 11:43
|
|
Tags: broker-dealers | FINRA | registered reps | regulation FINRA has drafted a proposal mandating that broker-dealer websites contain a link to its BrokerCheck system. The proposed amendment would also cover any website maintained by or on behalf of anyone associated with of member firms. This Website Is For Financial Professionals Only
The move makes it clear that FINRA wants consumers to have greater awareness of and access to BrokerCheck. FINRA is also weighing what additional information should be included on the public database.
There was considerable pushback in February of 2012 on an effort to include broker test scores. So much so that FINRA chief Richard Ketchum declared in May that FINRA had no interest in collecting such data.
But investment-related civil actions brought by a state or foreign regulatory body against those associated with a suit that has been dismissed because a settlement agreement was reached may become permanent information on BrokerCheck records.
Currently, many of the 4379 FINRA licensees provide no links to BrokerCheck, nor do broker profiles listed by firms.
BrokerCheck shows work profiles and regulatory histories of both current and former registered reps and broker-dealers.
FINRA has been searching for ways to better inform investors about broker and firm regulatory histories to equip investors with improved due diligence capability.
Read more...
|
|
Fiduciary Rule For Brokers? Not Dead Yet Say Advisors |
|
Friday, September 07, 2012 19:23
|
|
Contrary to published reports the fiduciary rule for brokers isn’t dead yet.
Or at least that’s what a handful of advisers who hold themselves out to be fiduciaries are saying, or at least hoping.
“It would be a mistake to interpret a period of quiet or pause in Securities and Exchange (SEC) public action on this issue as if 'it's over,'” says Kathleen M. McBride, AIFA, an accredited investment fiduciary analyst and founder of FiduciaryPath. “Progress has not stopped on the fiduciary standard -- this very crucial standard of care for investors. It may be taking longer for many reasons, including the need to look at potential rules and principles holistically and the need to get any rulemaking right when it does happen.“
Not all share that point of view. Barbara Roper, the Consumer Federation of America's director of investor protection, was quoted in published reports saying the SEC’s fiduciary rule making "appears to be stalled with little to no signs that the agency appears [likely] to go forward with the issue that [Chairman Mary] Schapiro once said was a priority.”
Also check out this Bloomberg report on the stall rule making efforts.
If it is dead, that’s bad news for investors says one advisor. “If this is indeed the case, the big wirehouse lobbyists have won and investors have lost,” says Chad Griffeth, AIF, co-founder of BeManaged. “If investors seek advice, they should be able to trust that it is in their best interest, not the broker’s. Most investors simply assume this is true. I have no issue with sales people selling products, but when investors assume brokers are acting in their best interests, there is an issue of consumer's expectations vs. reality.”
For what it’s worth, experts say the Labor Department (DOL) is likely to continue moving ahead with its fiduciary proposal. “I think if there's a change in administration, then we'll see action on the part of both the DOL and, possibly, the SEC,” says Chris Carosa, the chief contributing editor of Fiduciary News. “This is what we saw in the waning hours of the Bush administration from its DOL.”
The SEC Is Working On It?
According to McBride, the SEC has been working on a cost-and-benefits analysis, which, interestingly, some voices say may not be necessary. See, for instance, this report from Better Markets. And read also this report from Better Markets. And read this Reuters report highlighting recent efforts by fiduciary activists.
“I don't think this is over,” says McBride. “And, investors are voting with their feet and moving to where they can work with a fiduciary, someone who is willing to say, in writing, that they will align their interests with their client, the investor, period.”
Currently, McBride says that's the RIA, though not the dual registration, space. “That means, or includes, not wearing two hats, something that Ron Rhoades calls potentially fraudulent,” says McBride. “While many investors still don't understand the differences between brokers and investment advisors, they are starting to ask the questions that will give them answers that will drive them to an advisor who will be their fiduciary. So in the event the SEC cannot or does not act, perhaps this will be determined by the investor, and then the market for advice.”
To be sure, plenty of RIAs want the fiduciary rule to be applied to brokerage firms.
“The largest wealth management companies talk a good game about placing clients' interests first,” says Aaron Skloff, AIF, CFA, MBA, chief executive officer of Skloff Financial Group. “But, they clearly do not want to be legally obligated to place their clients' interests before their companies’ interests or any of its stakeholders. This is evidenced by their refusal to accept 100% fiduciary duty.”
Of course this is understandable to Skloff and others. “Many of the largest wealth and investment management companies are publicly traded companies owned by shareholders,” Skloff says. “And, like all publicly traded companies, they must act in the best interest of their shareholders – not their clients.”
By contrast, Skloff says privately owned RIAs are obligated by law to place to accept 100% fiduciary duty, placing their clients’ interests before any stakeholder or any other party – period.
And for what it’s worth, McBride points to research conducted by Ron Rhoades, the chair Alfred State’s Financial Planning Program and president of ScholarFi, which shows what the precedent was for brokers who provided advice to investors earlier, from the late 1930s and 1940s until relatively recently. “Rhoades’ research showed that the fiduciary standard was the standard for advice no matter what your registration, title or the type of account,” says McBride. “If you, the broker or advisor, held yourself out as a trusted advisor, by advertising or persuasion or action, you were deemed by regulators to be a fiduciary. Rhoades asks the basic question: Does that make new regulation under Dodd-Frank even necessary, given that precedent of holding any intermediary to the stringent fiduciary standard when they purported to be a trusted advisor?” This Website Is For Financial Professionals Only
|
|
Broker Says Record That Shows Investor Complaints Totaling $1.4 Million Should Be Expunged Out Of Fairness And A California Appeals Court Agrees |
|
Thursday, September 06, 2012 11:56
|
|
Tags: Dodd-Frank | FINRA | regulation The Financial Industry Regulatory Authority says that stringent criteria must be met before a broker can have a complaint from a client expunged from his or her record. On August 23, a California court completely upended that requirement. This Website Is For Financial Professionals Only
The First Appellate District in San Francisco said that a broker can seek to have a complaint expunged simply based on fairness or equity. Other authorities say this could damage the disclosure system in the financial industry.
They expect to see a jump in expunged records as a result of the ruling and say that it could open the floodgates for expungement requests outside the state of California, as well, since brokers would no longer be bound by FINRA rules.
The broker who brought his case before the court claimed that FINRA’s BrokerCheck reporting system damaged his career. He claimed that 13 of the 17 complaints had to do with the same investment and that his clean record since 1997 merited removal of the complaints.
FINRA has fought the broker’s attempts to have the complaints removed and a state court late last year denied his request to do so.
The appeals court ruled, however, that removal was not solely controlled by FINRA regulations. The court sent the broker’s case back to the trial court for another hearing.
FINRA thinks the broker’s record should retain the fact that he defended almost $1.4 million in investor claims against him, even though his clean record since indicates the equivalent of time served.
The expungement question has come more into focus as greater transparency about broker disciplinary action has been disclosed to the public.
FINRA began disclosing all complaints in August 2010 regardless of how long ago they occurred. The Dodd-Frank Act mandates that information disclosed to the public about brokers should even include their exam scores, any broker termination information, and other historical data on the BrokerCheck system.
In an investor climate that is still reeling from the shenanigans of Madoff, Stanford, and others, it seems ludicrous to think that such records could be discharged simply because a broker cries, 'That's not fair!'
Read more...
|
|
|
|
|
<< Start < Prev 1 2 3 4 5 6 7 8 9 10 Next > End >>
|
|
Page 8 of 56 |
|
|
