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The goals of this chapter are: Discuss the role regulation plays in the financial services industry, describe the key regulatory items that must be satisfied in dealing with clients, explain the responsibilities of a fiduciary, illustrate who regulates what in the financial services industry, . | Lecture Personal financial planning Web chapter C Regulation Web Chapter C Regulation 1 Chapter Goals Discuss the role regulation plays in the financial services industry. Describe the key regulatory items that must be satisfied in dealing with clients. Explain the responsibilities of a fiduciary. Illustrate who regulates what in the financial services industry. Identify the range of financial planner compliance factors. Target selected regulatory issues of special importance. 2 Overview Regulation in the financial services industry whether by federal state or professional association is principally concerned with providing appropriate information and beneficial advice to clients. Efficient markets mean that accurate and up to date information is supplied to all investors with buys and sells done at low transaction costs. Assumes that people have the time and ability to understand and act on that information in the investments area. It assumes then that all investors act logically and are highly knowledgeable and that our free market system ensures that they receive the information they need to make appropriate decisions. 3 Overview cont. Regulators assume that people often make incorrect choices and can be exposed to unscrupulous advice that is motivated by self-interest. Regulators endeavor to represent and protect the average household. They establish rules and regulations that constitute acceptable and unacceptable behavior. The goal of financial regulation in our system however is to bring about an efficient marketplace with fairness for all participants. There are a number of factors that are intended to ensure that a financial planner and other financial services individuals will provide appropriate advice. They include competency suitability due care compliance ethical behavior and documentation. 4 General Standards of Proper Professional Behavior Competency The ability to handle a given task with the expertise necessary to provide a satisfactory outcome.
