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Regulation and Compliance > Federal Regulation > SEC

SEC Chairman Speaking the Fiduciary Language

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They follow her strong statements in May and June on the topics of investor protection and the fiduciary standard. Yet, last week the Chairman went a notable step further in comparing the standards to one another. In June she only noted that the standards of conduct of the different regimes, “are not consistent.” Last week, for the first time in her public comments this year, she focuses attention on the contrasts between the standards. The Chairman clearly states that the fiduciary standard “should not be a watered-down, ‘fair and reasonable’ commercial standard…[rather, it should be] the type of fiduciary standard that applies to a relationship of trust and confidence…”

In the continuing effort to “harmonize” the two standards, one of the central issues is whether, at the outset, the standards are viewed as either fundamentally different or are viewed as “more similar than they are different.” Depending on the view taken, decisions regarding how the authentic fiduciary standard appropriately applies in a multitude of facts and circumstances may vary substantially. What constitutes “a relationship of trust and confidence” may also appear quite different.

This is why the Chairman’s statement speaking to this issue is important.

The Committee for the Fiduciary Standard had the opportunity to visit with the Chairman earlier this month, as reported on Wealth ManagerWeb, and to discuss our views on the authentic fiduciary standard. We appreciated her time, and the significant number of detailed questions she posed to us. We look forward to continuing the dialogue.

Knut A. Rostad ([email protected]) is the regulatory and compliance officer at Rembert Pendleton Jackson (RPJ), a registered investment advisor in Falls Church, Virginia, and chairman of The Committee for the Fiduciary Standard. The views expressed here are his own and do not necessarily reflect views of the Committee.

See more of Knut Rostad’s Regulatory Reason Blog posts:

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Why did the SEC accept a $33 million settlement in light of its allegations that Bank of America failed to disclose that bonus payments were authorized for up to $5.8 billion? Judge Jed Rakoff wants to know. …

The Authentic Fiduciary Standard–What’s the Fuss About?
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Recent discussion in some quarters has focused on the “similarities” between the fiduciary and “arm’s length” standards. The clear implication appears to be: What’s all the fuss about whether investors retain fiduciary advisors or not? …

Blog: Talking the “Fiduciary Talk” in Washington
July 07, 2009
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. How will this translate into legislation?…


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