Worried That Your Next SEC Audit Will End in Fines? TAKE THE ASSESSMENT

What is Fiduciary Duty and What Does that Mean For Your Firm?

Fiduciary Duty

The term “fiduciary duty” is often used in finance, but its meaning may be unclear to some. Recently, the SEC’s guidelines removed explicit mention of fiduciary duty, raising concerns among activists that this responsibility may be diminished for registered investment advisers (RIAs). Fiduciary duty refers to the obligation of service professionals to act in the best interests of their clients, prioritizing them over their own business interests. Balancing client interests with business viability can be challenging, particularly in volatile markets. Demonstrating actions in the best interest of clients and regulating fiduciary duty are important considerations in the finance industry.

1. Record Decision Making

A recent example of the SEC cracking down on decisions that are not in the best interest of your clients is when it comes to fees. The SEC doesn’t require you to go through with transactions that only require the lowest amount of fees… but if you do choose another option you better have a good record as to why! But it is good to get processes in place to document all decision making processes and how much information has been disclosed to clients before they make a choice. And remember to hold onto these documents for at least 7 years as the SEC has also been following up many historical cases.  

2. Disclosing Conflicts of Interest

Another recent case saw the SEC cracking down on the disclosure of conflicts of interest. It has become such a large focus that it is even listed in their 2022 examination priorities which can be found HERE.  But what does conflicts of interest have to do with fiduciary duty? Well, fiduciary duty means acting in the clients best interest. And any business agreements that see you prioritizing certain trades, companies, insurances over others could be seen as being in direct conflict of what is best for the client. So make sure that you are not in breach of your fiduciary duty but notifying clients of when there could be a conflict of interest. Make sure to also check what you are required to disclose to the regulators in regards to potential conflicts of interest.

Overall, if you are making sure that you have submitted all of your required disclosures and are acting with the best interest of your clients, you shouldn’t have anything to worry about. 

But if worrying about the processes and forms required to stay on top of all of this sounds like a massive headache, then why not reach out to My RIA Lawyer? We are experts at keeping you out of trouble with the regulators so that you can focus on serving your clients and doing what you do best.

If you are facing compliance shortcomings and think you may not be living up to your fiduciary requirements, we can help. At My RIA Lawyer, our regulatory compliance geeks help financial advisors and firms navigate the legal complexities of the RIA world. We work virtually, long-distance, with clients from coast to coast.

Contact Us Today!

Author Bio

Leila Shaver is the Founder of My RIA Lawyer, a law firm that provides compliance and legal consulting for financial institutions. With extensive experience as a securities attorney and compliance expert, she has served as Chief Compliance Officer and General Counsel to RIAs, BDs, and TAMPs with billions in assets under management.

Leila understands the challenges RIAs face and is committed to helping RIAs streamline their processes, mitigate risks, and ensure compliance with regulatory requirements. She received her Juris Doctor from Atlanta’s John Marshall Law School and is a West Georgia Young Lawyers’ Association member. Leila has received numerous accolades for her work, including the Carroll County Bar Association’s Outstanding Young Lawyer Award in 2017.

LinkedIn | State Bar Association | Avvo | Google