Uniform fiduciary standard LifeHealthPro Blog added by Brian Anderson on February 1, 2011
Brian Anderson

Brian Anderson

Joined: September 17, 2010

My Company


To the surprise of no one, the SEC submitted a staff study to Congress a few days ago “recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers — no less stringent than currently applied to investment advisers under the Advisors Act — when those financial professionals provide personalized investment advice about securities to retail investors.”

The study looking into obligations and standards of conduct of financial professionals, provided to Congress on Jan. 21, was required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The study notes that many retail investors do not understand and are confused by the roles played by investment advisers and broker-dealers, and are also confused by the standards of care that apply to investment advisers and broker-dealers. It further states that “retail investors should not have to parse through legal distinctions to determine” the type of advice they are entitled to receive. “Instead, retail customers should be protected uniformly when receiving personalized investment advice about securities regardless of whether they choose to work with an investment adviser or a broker-dealer.”

Again to no one’s surprise, statements of support and opposition from a variety of interested parties were quick to follow. None was quicker than a joint statement by SEC commissioners Kathleen L. Casey and Troy A. Paredes, who wrote separately in order to state for the record their views on the study and its recommendations. Here’s an excerpt:

“In our view, the study’s pervasive shortcoming is that it fails to adequately justify its recommendation that the commission embark on fundamentally changing the regulatory regime for broker-dealers and investment advisers providing personalized investment advice to retail investors. The study recommends the adoption of a new uniform fiduciary duty standard and harmonization of two disparate regulatory regimes. But it does so without adequate articulation or substantiation of the problems that would purportedly be addressed via that regulation. The study also does not adequately recognize the risk that its recommendations could adversely impact investors.”

And their conclusion:

“Much is at stake. Americans invest trillions of dollars through broker-dealers and investment advisors. Regulation based on poorly supported recommendations runs the risk of restricting retail investors’ access to affordable personalized investment advice and the range of products and services they currently enjoy.

“There is no statutory deadline for any follow-on rulemaking to this study. Given the lack of concrete data provided in the study and the need for additional research and analysis, we believe that any rulemaking without such consideration would be ill-conceived at best and harmful at worst.”

You can read the entire statement (only takes a minute or two) by clicking here.

The Financial Planning Coalition (a planner group), the Committee for the Fiduciary Standard (a group that represents planners, investment advisors and others) and the Consumer Federation of America all came out with statements commending the SEC report’s findings.

NAIFA and AALU, meanwhile, came out with statements praising the letter from commissioners Casey and Paredes.

For those who want to dig deeper into the full, 208-page SEC study, you can do so by clicking here.

No word yet on what the SEC will do next on the matter — or when action will be taken. As always, I encourage you to share your thoughts on the matter via the comment box below.
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