Fiduciary Standard Coming for Broker-Dealers

The Securities and Exchange Commission announced last week that next April it plans to introduce a fiduciary standard for broker-dealers. Since last month when the Department of Labor issued its fiduciary rule for tax-advantaged retirement accounts, the securities industry has been waiting to see if the SEC would join the Department of Labor in a push to raise the legal and ethical standards for broker-dealers and agents. Continue reading

Decorative Scales Of Justice In The LibraryThe Securities and Exchange Commission announced last week that next April it plans to introduce a fiduciary standard for broker-dealers. Since last month when the Department of Labor issued its fiduciary rule for tax-advantaged retirement accounts, the securities industry has been waiting to see if the SEC would join the Department of Labor in a push to raise the legal and ethical standards for broker-dealers and agents.

Currently, broker-dealers and agents are held to the less stringent suitability ethical standard while investment advisors and investment advisor representatives are held to the higher fiduciary standard. The higher standard requires disclosure of all conflicts of interest and ensures the client’s interests come first. While SEC Chair Mary Jo White has said she supports a uniform fiduciary rule, Republicans in Congress have strongly opposed the effort by the Labor Department to expand the fiduciary standard to retirement accounts.  However, many in the securities industry hope that the SEC’s efforts will harmonize with the Department of Labor’s efforts, making compliance more uniform and less complicated.

Exam Alert: SEC requires broker-dealers to search for lost holders of securities

On December 21, 2012, the SEC approved new rules that require broker-dealers to conduct searches for holders of securities with whom they have lost contact. The new rules also requires “paying agents” (certain issuers, broker-dealers, transfer agents, and other entities) to notify certain persons in writing when the paying agent has sent the person a check that has not been negotiated. Continue reading

On December 21, 2012, the SEC approved new rules that require broker-dealers to conduct searches for holders of securities with whom they have lost contact. Currently, transfer agents are required to conduct such searches – the rule will expand the requirement to broker-dealers.

The new rules also requires “paying agents” (certain issuers, broker-dealers, transfer agents, and other entities) to notify certain persons in writing when the paying agent has sent the person a check that has not been negotiated. This notification is not required if the value of the check is less than $25.

The new rules will become effective 60 days after the date of publication of the release in the Federal Register.

Source: SEC Release 2012-277: SEC Approves New Rules Regarding Lost Holders of Securities

This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 62, and Series 99.

Exam Alert: IRS requires broker-dealers and mutual funds to report cost basis of stocks

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to Continue reading

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to the IRS and to investors.  In 2011, this reporting requirement only applies to most stocks, while in 2012 and beyond, the requirement will apply to all stocks.  In 2011, the rule will not apply to mutual fund shares and shares purchased via dividend reinvestment plans. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66 exams.

IRS news release: http://www.irs.gov/newsroom/article/0,,id=228907,00.html

Analysis by the Securities Technology Monitor: http://www.securitiestechnologymonitor.com/photo_gallery/1_36/27400-1.html