From: Hartzman, George
Sent: Thursday, January 05, 2012 10:55 AM
To: Tolson, Ken
Cc: Mixdorf, Brian M.; Spivey, William; Eason, Janet
Subject: RE: Ethics Line Issue
As a Fiduciary, how should I respond?
"we do not share the results or how it will be addressed. "
"What Does It Mean to Be a Fiduciary?
Fiduciary duty represents the highest degree of trust and confidence
that the investment advisor will act in your best interest.
Please explain how I am acting in my clients best interests
if I accept your answer and do nothing more?
Investment Advisors are governed by the Investment Advisers Act of 1940
and applicable state securities laws,
which govern conduct and disclosure requirements,
creating a high legal standard referred to as “fiduciary” duty.
Breach of Fiduciary Duty
When brokers agree to manage clients assets
and/or obtain permission to place orders on their behalf,
the brokers have additional fiduciary duties to these clients.
Recently, a Federal appeals court determined
that when brokerage firms handle client accounts in fee-based “wrap accounts”
they are subject to the Federal Investment Advisors Act of 1940.
This Act places a fiduciary duty on investment advisors.
Prior to that decision, the SEC had granted an exemption from this act
for stock brokers and their firms.
A claim for “breach of fiduciary duty” is considered in the nature of a fraud
under laws of most jurisdictions
and this claim is afforded certain legal benefits over other claims such as negligence.
As a fiduciary, your investment advisor has the duty to:
Make full and fair disclosure of all material facts,
particularly where the advisor’s interests may conflict with the client’s
How can I disclose "all material facts"
if I am not informed of what they are?
Have a reasonable, independent basis for their investment advice
I thought I had a "reasonable, independent basis for their investment advice"
until it was reported that I may not have had, which creates a conflict of interest
which I have not been given a way to deal with
if I don't know what I should?
Be loyal to clients
An advisor will be measured against a higher standard of conduct than a broker.
...Only after you and the firm enter into a written agreement with Wells Fargo Advisors
does the Financial Advisor become a fiduciary.
As a Fundamental Choice Portfolio Manager
do I not have a fiduciary obligation to my clients?
In such agreements, the firm and your Financial Advisor
explicitly acknowledge an advisory relationship and obligations to you.
When acting as your investment advisor,
we provide you with disclosure documents about our Advisory services.
https://my.advisor-connection.com/infomax/PCG/products/advisory/resources/general/marketing/replicate_all/whatdoesitmeantobeafiduciary.pdf
fi•du•ci•ar•y –
A Financial Advisor held to a Fiduciary Standard
occupies a position of special trust and confidence when working with a client.
As a fiduciary, the Financial Advisor is required to act
with undivided loyalty to the client.
This includes disclosure
of how the Financial Advisor is to be compensated
and any corresponding conflicts of interest.
..."Prudent Man Rule – A fiduciary must act “with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like capacity” would act.
This rule is derived from the common law of trusts.
This is an objective standard based upon how a person
with experience and knowledge of a certain area would act in a given situation."
29 U.S.C. §1104 (a)(1)(B).
"Fiduciaries have important responsibilities and are subject to standards of conduct
because they act on behalf of participants...
These responsibilities include:
Acting solely in the interest of plan participants and their beneficiaries
and with the exclusive purpose of providing benefits to them;
Carrying out their duties prudently;
...The duty to act prudently is one of a fiduciary’s central responsibilities...
...With these fiduciary responsibilities, there is also potential liability...
DOL
"Whoever, having knowledge of the actual commission of a felony
cognizable by a court of the United States,
conceals and does not as soon as possible make known the same
to some judge or other person in civil or military authority
under the United States, shall be fined under this title
or imprisoned not more than three years, or both."
TITLE 18–CRIMES AND CRIMINAL PROCEDURE PART I–CRIMES
CHAPTER 1–GENERAL PROVISIONS
No comments:
Post a Comment