From the Desk of Jim Eccleston at Eccleston Law Offices:
The Financial Industry Regulatory Authority is looking very closely at advisory accounts in dually registered investment advisor/broker-dealer firms, Morgan Stanley Compliance and Regulatory Group Head Debra Roth said Wednesday.
“If you are not trading, are you really advising the client?” Roth asked rhetorically at a dual registrant seminar for the Practising Law Institute. Others in the industry have raised this issue as well, noting some clients who are charged fees for investment management but aren’t getting much financial advice would pay less if they were charged commissions instead.
Roth warned the attendees that Financial Industry Regulatory Authority and the Securities and Exchange Commission have significantly improved their ability to collect and analyze electronic records from advisory firms and brokers. And, she observed “We have found them to be impatient,” the Morgan Stanley compliance executive said.
RCS Capital Chief Compliance Officer Joseph Neary remarked that having separate compliance manuals for investment advisors and broker-dealers can go a long way to persuading the regulators that the two business operations are distinct. He noted in the last three or four years, FINRA has become much more attuned to the advisory side of financial firms that also offer brokerage services.
Specially, it was noted that advertising and marketing have become an area of pain for dual registrants, particularly for workers wearing multiple hats, SEI Investments Distribution General Counsel John Munch said. There are fundamental differences in advertising and marketing rules for IAs and BDs.
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