The Issues

On August 30, 2010, FSI submitted a detailed 62 page comment letter to the SEC in response to its request for public comment related to its study of the obligations and standards of care of broker-dealers and investment advisers providing personalized investment advice about securities to retail investors (Study).

FSI has previously reported on the status of the Taxpayer Responsibility, Accountability, and Consistency Act of 2009 (H.R. 3408 and S. 2882) introduced in the House and Senate by Rep. Jim McDermott (D-WA, 7th) and Senator John Kerry (D-MA), respectively. The core provisions of these bills make it more difficult for employers to classify workers as independent contractors.

FSI is co-sponsoring a forum on “The Fiduciary Standard in a Brokerage Setting,” with five other organizations. The event is scheduled to take place September 24 in Washington, DC.

On July 21, the SEC held an Open Meeting to propose for public comment significant reforms to Rule 12b-1. The proposal is intended to address concerns that the fees no longer serve their intended purpose of supporting fund distribution, represent additional sales compensation, and are poorly disclosed to clients.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), was signed into law on July 21, 2010. Among other things, the Dodd-Frank Act requires the SEC to conduct a six-month study on the impact of adopting a fiduciary duty for broker-dealers.

Over the past several months, FSI has been working with the state of Florida to improve approval times of broker-dealer and investment adviser branch office applications. Florida regulators recently provided a list of “ common issues that may delay a branch office application.”

On Friday, August 6, 2010, FSI's President and CEO, Dale Brown and David Bellaire, FSI's general counsel and director of government affairs presented a Special Briefing on the SEC’s Proposed Revisions to Rule 12b-1 for both FSI's financial advisor and broker-dealer members.

On May 26, 2010, FINRA Published Regulatory Notice 10-25 seeking comments on its proposal to expand FINRA’s registration requirements to include individuals who are engaged in, or supervising, activities relating to sales and trading support, and that handle customer assets. On June 30, 2010, FSI submitted a comment letter in response to this Regulatory Notice.

On July 26, 2010, FSI submitted a letter SEC Chairman Mary Schapiro, and the four other SEC Commissioners, laying the groundwork for FSI’s engagement on the three important studies the SEC is charged with conducting as a result of the Dodd-Frank Act.

Last week, FSI filed an amicus brief in Taylor, et al. v. Waddell & Reed, Inc., et al. FSI‘s brief explains what the independent broker-dealer model is, how independent financial advisors function as independent contractors, and...

FSI is pleased to endorse Mari Buechner, 2010 chair of the FSI Board of Directors, for a two-year small firm seat on the FINRA Board of Governors. In addition, FSI has endorsed Lisa Roth for a three-year small firm seat.

FINRA has released a rule proposal to expand its registration requirements to include individuals who are engaged in, or supervise activities relating to sales and trading support, and who handle customer assets. The Proposed Rule could have important implications for independent broker-dealers, and the individuals who work in the broker-dealers' back offices by requiring each "covered person" to register as an Operations Professional, take an examination, and meet continuing education requirements.

During the course of this summer, FSI's Advocacy staff has met, or will meet, with key state securities regulators in the following states...

On Friday, June 25, 2010, the conferees from the House and Senate finished what they hope will be the final version of the financial regulatory reform bill. The bill contains a directive for the SEC to conduct a comprehensive study of all the issues involved in harmonizing the regulation of all providers of retail financial advice, including a fiduciary standard of care and enhanced supervision of RIAs.

Political insiders in Michigan speculated that Governor Jennifer Granholm (D) may expand the state sales tax to apply to services, including financial services, in an effort to raise revenues. On February 11, 2010, FSI sent a letter to key legislators in Michigan explaining the unintended consequences of imposing a state tax on services.

The Michigan House of Representatives is considering legislation (H.B. 6141) that would exempt certain investment adviser representatives (IARs) from the requirement to sit for the Investment Adviser examination (Series 65 or Series 66), if they meet one of the criteria set out in the bill.

FINRA has released a rule proposal to expand its registration requirements to include individuals who are engaged in, or supervising, activities relating to sales and trading support, and that handle customer assets.

Earlier this afternoon, the House and Senate Conference Committee charged with finalizing the financial services regulatory reform bill voted to require the SEC to conduct a comprehensive study of all the issues involved in harmonizing the regulation of all providers of retail financial advice, including a fiduciary standard of care and enhanced supervision of RIAs. If signed into law, the SEC would be required to report the results of the study to Congress within six months.

On June 17, 2010, FSI submitted written testimony and a statement for the record on a Senate hearing related to “Leveling the Playing Field: Protecting Workers & Businesses affected by Misclassification.” The hearing took place before the U.S. Senate Committee on Health, Education, Labor, and Pensions.