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The United States Government Accountability Office, or GAO, has issued a report that responds to a mandate included in Section 919C of the Dodd-Frank Act that directed GAO to conduct a study on the oversight and regulation of financial planners.  There is no specific, direct regulation of “financial planners” per se at the federal or state level, but various laws and regulations apply to most of the services they provide. Financial planners are primarily regulated as investment advisers by the SEC and the states, and are subject to laws and regulations governing broker-dealers and insurance agents when acting in those capacities. In addition, Federal and state agencies have regulations on marketing and the use of titles and designations that can apply to financial planners.

The report notes that existing statutes and regulations appear to cover the great majority of financial planning services, and individual financial planners nearly always fall under one or more regulatory regimes, depending on their activities. While no single law governs the broad array of activities in which financial planners may engage, given available information, it does not appear that an additional layer of regulation specific to financial planners is warranted at this time.

The report also concludes consumers may be unclear about standards of care that apply to financial professionals, particularly when the same individual or firm offers multiple services that have differing standards of care.  As such, consumers may not always know whether and when a financial planner is required to serve their best interest.

In addition the GAO notes that financial planners can adopt a variety of titles and designations. The different designations can imply different types of qualifications, but consumers may not understand or distinguish among these designations, and thus may be unable to properly assess the qualifications and expertise of financial planners.  

GAO recommends that the SEC (i) assess investors’ understanding of financial planners’ titles and designations and (ii) collaborate with the states to identify methods to better understand issues associated with the financial planning activities of investment advisers.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.