The Self-Regulatory Organization for Independent Investment Advisers is partnering with fi360, a producer of fiduciary training programs and exams, to develop the framework for a specialized fiduciary exam for investment advisors.
The partnership, announced today, is evidence that Sroiia (pronounced "sir-oy-uh") is taking concrete steps to position itself as the SRO for financial advisors by creating an exam that will test applicants' understanding of fidiciary duty.
But before Sroiia can serve in that role, Congress needs to authorize the Securities and Exchange Commission to approve one or more SROs for investment advisors. The SEC already has issued a report in favor of a common fiduciary standard for brokers and investment advisors.
Sroiia, launched in March, was formed to serve as an SRO designed to promote and adopt fiduciary rules for investment advisors, consistent with the traditional common law standard of protection for investors. Two University of Mississippi law students and one of their professors, Mercer Bullard, a former SEC assistant chief counsel, launched the organization, which has been welcomed by the Committee for the Fiduciary Standard.
The committee, which includes leading financial advisors as well as fi360, was formed last year. The committee says any SRO for investment advisors should be an RIA-only SRO that operates under the fiduciary standard, as opposed to Financial Industry Regulatory Authority, the broker-dealer SRO that regulates under the suitability standard of care.
While the committee wants the SEC to maintain its roll as the RIA regulator, the group is preparing for an SRO by supporting Sroiia.
Sroiia and fi360 have agreed advisors would need a passing score on its new fiduciary exam to register with Sroiia as an investment advisor representative, and would also have to satisfy any other state-mandated qualifying exams or professional designation waivers.
States typically administer the Series 65 or 66 exam for investment advisor representatives of both federal and state-registered advisory firms. The exam will test applicants' understanding of the bona fide fiduciary duty, which encompasses duties of loyalty and due care to the client, and how to avoid or manage conflicts in the best interest of the client.
"This exam will ensure that advisors understand the bona fide fiduciary standard that all Sroiia members will be subject to, including the requirement that advisors always act solely in their clients' best interests," said Timothy Collins, co-CEO of Sroiia.
"It is our belief, based on thousands of hours of training of financial advisors, that the fiduciary duty is poorly understood within the industry," said Blaine Aikin, fi360 chief executive officer.
To promote its proposed fiduciary exam, Sroiia is launching a Web site, (www.sroiia-us.org), that includes a blog, a newsroom and a section dedicated to investment advisors. "It is important for us to establish a Web presence and media outlet for our announcements and developments," said D. Tyler Roberts, Sroiia co-CEO.
Director of Internet Media Joe Gallagher said experts in the field will be encouraged to submit comments to the blog to participate in the conversation.
"In the interest of providing accessible and applicable news to everyone who wants to know more about Sroiia's important work and the relevant issues surrounding it, we invite professionals from all areas, including investment advisors, scholars and attorneys, to submit articles and comments for our blog," Gallagher said.