Decisions On Fiduciary Standard And Regulator Of RIAs Delayed Officially

Friday, June 17, 2011 04:48
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Decisions On Fiduciary Standard And Regulator Of RIAs Delayed  Officially

Tags: compliance | Dodd-Frank | registered investment advisors | sec

Since movement in Washington can make watching paint dry look fast, none of the trade news outlets for advisors yesterday covered the fact that the SEC made its delay official yesterday. Don't expect any decisions regulatory issues affecting advisors anytime soon.

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The SEC said on Wednesday that reforms to rules on derivatives--the instruments that played a central role in the 2008 financial collapse--were delayed.

 

Derivatives reform is a higher priority to regulators than the regulatory questions affecting independent advisors.

 

So don't expect a resolution anytime soon on the two key issues affecting retail investors and their financial advisors.

 

The two key issues affecting investment advisors, brokers, financial planners, and other retail advisors are whether to impose a single fiduciary standard on all financial advisors and how to improve regulation of RIAs.

 

It's humbling to to think of it, but the regulatory reforms being implemented by Dodd-Frank are so massive that the two key issues affecting investment advisors and registered representatives are small potatoes.

 

It was the private trading of mortgage "swaps" that ruined Bear Stearns, Lehman Bros., and AIG, which almost caused a cascade of defaults that could have brought down the worldwide financial system.

 

While the retail advisory issues are important, regulation of derivatives deservedly takes priority.

 

With basic definitions on derivatives regulation not yet decided--such as what is a swaps dealer--yet to be decided, the patchwork of regulators overseeing derivatives markets, which incldes regulators of commodities trading, banking, and insurance, are months away from being able to enforce Dodd-Frank-mandated financial reforms.

 

While Dodd Frank had established a July deadline for regulation of derivatives, it's widely expected to be delayed by a year or 18 months, which means it could drag over and through the 2012 elections.

 

Only after these bigger issues are decided will regulators be ready to tackle the fiduciary standard and RIA regulation issues that affects private wealth advisors and brokers. 

 

 

 

 

 

 

 

 

 

 

 

 

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