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Mentor RIA Consulting

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Best Interest and Bureaucracy

Posted on August 10, 2018 at 10:54 AM
Amidst the plethora of bureaucratic rule making, it is common to hear the regulated complaining about the burdensome nature of the seemingly endless rules. The amount of time and energy – and so expense – which goes into compliance seems to increase almost daily. The public, the pundits and of course the regulators themselves all seem to shrug off those complaints as if they were merely sour grapes and without any real meaning. Meanwhile, those in the industry continue to seek clarity and simplicity.
The recent release of the SEC’s proposed best interest rule seems to put the lie to any claim of sour grapes and provides support for claims of over-regulation and excessive bureaucratic burdens. The rule itself – almost four pages in length – pales next to the accompanying “preamble” of some 400 pages more. That is crazy.
As you might well imagine, there is little of value in those four hundred pages but they need to be examined to ensure that no surprises slip in. This document is tailor made for lawyers who will look for any lever in those four hundred pages to allow them a basis for suing the industry deep pockets and make some money for themselves while saying it is for the investors. It sure is not about the investors – the consumers that are supposedly to be protected. They (wisely?) won’t take the time to dig through all that drivel the bureaucrats have written.
[In one person’s view] there should simply be a short and clear rule that says the purveyors of investment advice must act in the best interest of their clients. The rule should also say that disclosure of actual or likely conflicts does not cure any practice that is not going to result in the best interest of clients being served. Just because you tell someone that your business incentivizes behavior that is in the perceived best interest of the business and its employees (and not necessarily in the best interest of its clients) cannot excuse or protect the behavior. That type of safe harbor only leads to abuse.

Categories: Clients, Compliance, RIA Business

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