U.S. Reps. Zach Nunn (R-IA) and Gregory Meeks (D-NY) introduced legislation that seeks to remove regulatory barriers for independent financial advisors that penalize them for operating as small businesses.
Currently, many registered financial advisors are prohibited from using their own business entities to receive compensation. This is a restriction that other licensed professionals, including lawyers, accountants, and insurance agents, aren’t subject to. For many small firms, these restrictions make it harder to stay independent, especially in small and rural communities, and add the burden of additional red tape.
Their bill, the Clarity for Compensation Act, looks to fix this issue by provide an exemption from the definition of a broker for certain registered representative-owned personal services entities.
“Small-town financial advisors shouldn’t be treated differently just because the rules haven’t kept up,” Nunn said. “These are folks helping families save for college, buy their first home, or plan for retirement. Our bipartisan bill gives them the same flexibility other professionals already have and helps keep trusted, independent advisors serving local communities.”
The lawmakers said the bill will help independent financial advisors grow their businesses, keep services local, and compete on a level playing field.
“I’m pleased to co-lead the bipartisan Clarity for Compensation Act with Rep. Zach Nunn,” Meeks said. “This bill makes compensation rules in the financial services industry clearer and easier to understand. It improves oversight, supports the next generation of professionals, and helps more people access reliable financial advice.”
The bill is supported by several groups, including Finseca and the Financial Services Institute.
“As the industry evolves, the rules must also modernize to meet the needs of advisors, firms and, most importantly, American investors. Independent financial advisors need clarity and certainty that receiving commissions through their business entities will not expose them to claims by a future SEC that they are required to register as broker-dealers,” Financial Services Institute President & CEO Dale Brown said. “This bill ensures that these businesses can operate more efficiently, recruit the next generation of advisors, and offer their clients a wider range of products and services to better meet their financial needs.”