Law firm Stradley Ronon Stevens & Young has set up a new group that will focus exclusively on fiduciary governance, in an effort to help investment firms navigate an increasingly complex landscape.
The firm’s fiduciary governance practice will focus on providing counsel to banks, broker-dealers, investment advisors and mutual fund directors as they deal with an industry covered by a mishmash of regulations and standards in the wake of the U.S. Court of Appeals for the Fifth Circuit’s March decision to overturn the Department of Labor’s (DOL) fiduciary rule.
Lawrence Stadulis and George Gerstein will co-chair the group out of the firm’s Washington, D.C. office.
In a memo to clients the duo said they would closely track the reactions of state-level legislatures to the Fifth Circuit’s decision and any rule making on the topic by the Securities and Exchange Commission (SEC).
Nevada and Connecticut already have their own laws on the books which define who must operate under a fiduciary standard and subsequently impose disclosure requirements. Similar fiduciary governance bills are already floating around state legislatures in New Jersey, New York and Illinois.
‘Whether more states will act in response to the Fifth Circuit’s decision on the DOL fiduciary rule is anyone’s guess,’ Stadulis and Gerstein wrote.
‘We know that a number of state legislatures have pointed to skepticism over rulemaking by the DOL and SEC as a basis for their own legislative and regulatory efforts.’
The SEC is carrying out its own internal review of the questions surrounding the fiduciary rule and is expected to make its own rule proposal before the end of the second quarter, which could potentially unify the obligations for investment advisors and broker-dealers. A rule proposal from the SEC could come ‘in a matter of weeks,’ the authors wrote.
‘One likely aspect of the SEC proposal will be a requirement to deliver a summary disclosure document that will describe services, fees, conflicts, product offerings and other pertinent information,’ the authors added. ‘The proposal may not expressly use the term “fiduciary” but will most likely impose a uniform duty to act in the “best interests” of clients and prohibit, or at least limit, the use by broker-dealers of certain titles, such as ‘financial advisor’ in marketing and sales materials.’
Stradley Ronon’s fiduciary governance group will include 13 other members alongside Stadulis and Gerstein, the firm said. Other members include Goldberg, Baker, Podheiser, David Grim and Sara Crovitz, the latter two of which have worked for the SEC’s Division of Investment Management as director and associate director, respectively.