Some words are clear enough. The Obama Administration proposes that brokers giving investment advice should meet a fiduciary standard. SEC Chairman Mary Schapiro states strong support for a fiduciary standard. What is not clear is how these expressions of fiduciary support will translate into legislation. Longstanding industry opposition will not just go home. Also, some policymakers suggest a fiduciary standard is an empty vessel to be filled as we please.
FINRA CEO Richard Ketchum has expressed support for a single standard, and added, “I think it makes sense for it to be a fiduciary standard,” according to a May 13 article in Investment News.
What he means or understands by a fiduciary standard (FS), however, is not clear. Ketchum’s said more than once that FINRA needs to explore “whether a properly designed fiduciary standard could be applied to broker-dealers’ selling activities.” He also speaks of FINRA’s “very detailed set of rules” and its “comprehensive examination and enforcement regime” as a prelude to his view of the strength of the suitability standard. It provides “a level of specificity over and above a fiduciary standard,” Ketchum said in the Investment News article. (He later clarified he did not mean the suitability standard was “higher” than the fiduciary standard.) Most recently, he stated in a June 17th speech to the Exchecquer Club In Washington, DC, that: “We agree with the Obama administration that a fiduciary standard should be established…(but)….the kind of additional protections provided to investors through the FINRA model are essential.”
Ketchum seems to focus on two points. First, the suitability standard may be better for brokers, and 2) whatever the FS means today may not be relevant, because what really matters is what a “properly designed” FS would mean for brokers in the future.