Jeff Lang, an attorney and shareholder with Stark and Stark law firm, told conference attendees that the latest SEC guidance will continue having a chilling effect on advisors “who don’t want to be part of a sweep, if the information is not considered acceptable. No one wants to be that test case.”
What the SEC needs to do is clarify, with examples, when and how fiduciaries can use the word, Lang said. “From my legal standpoint, there are many state-registered and federally registered investment advisors who by law are actually held to a fiduciary standard. Wouldn’t it be great for them to be able to say that under the legal obligations section?”
The concern is that the SEC “is trying to level the playing field, not for true fiduciaries, but for those who are conflicted, such as securities and product sales people,” Peter Mafteiu, principal of Sound Compliance Corp., told Financial Advisor magazine.
“For the SEC to say that Reg BI is a universal best-interest standard is just inaccurate. Dually registered advisors are only fiduciaries at the time they make a recommendation,” said Mafteiu, who is helping RIA firms use the word fiduciary in their Form CRS.
Rostad, who wrote SEC Chairman Gary Gensler in January asking for clarification regarding use of the term fiduciary in summaries, said he is actively lobbying both Gensler and SEC commissioners to overturn the staff guidance.
The Investment Adviser Association is also “continuing conversations” with the SEC in a bid to get greater clarity around RIA’s ability to describe themselves a fiduciaries in their relationship summaries, IAA President Karen Barr and General Counsel Gail Bernstein said in an interview.
“Where we’re concerned most is that even though the SEC says you can use the word 'fiduciary,' the rest of the language in the [guidance] indicates that it could be an embellishment. And we very strongly believe that fiduciary is not an embellishment. It’s a factual statement. RIAS are fiduciaries. It’s correct and accurate statement of their duties under the law,” Barr said.