SEC Seal

It's the Disclosure, Stupid!

SEC Seal

In  perusing today’s press releases (9/2/2014) from the Securities and Exchange Commission (SEC), we received a reminder of the fact that just because a registered investment adviser has a fiduciary duty to act in the best interests of its clients does not mean that it will necessarily do so. Specifically, the SEC found that Robare Group Ltd, received payments of about $440,000 from its custodial brokerage firm for putting client money into certain mutual funds. Interestingly, the SEC did not name the brokerage firm perhaps because the payments themselves were not a violation of the Investment Advisers Act of 1940 but rather the failure on the part of Robare to disclose them to its clients. Marshall S. Sprung, co-chief of the SEC Enforcement Division’s Asset Management Unit explained it as follows:

“Payments to investment advisers for recommending certain types of investments may taint their ability to provide impartial advice to their clients. By failing to fully disclose its agreements with the brokerage firm, Robare Group deprived its clients of important information they were entitled to receive.”

Since its inception in 1999, Index Fund Advisors has emphasized the importance of investors working with advisors who only receive payments directly from their clients. While an advisory firm may receive non-monetary benefits from other investment firms, these benefits are required to be fully disclosed in the firm’s filing with the SEC. Please click here if you would like to see that disclosure on any investment advisory firm, including Index Fund Advisors.

If you would like to learn more about the advantages of working with a fiduciary wealth advisor, please give us a call at 888-643-3133.