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October 07, 2009 at 08:00 PM
The Financial Services Institute (FSI), the lobbying and policy advocacy voice for independent broker-dealers and their affiliated financial advisors, has issued a statement on October 6 urging the House Financial Services Committee to apply a new universal standard of care to broker/dealers in addition to investment advisors under the proposed Investor Protection Act of 2009 (IPA).
The FSI comment, issued by Dale Brown, the group’s president and CEO, stated, “We are suggesting another approach to harmonization of broker/dealer and investment advisor regulation that will work for all client situations, and across the broad spectrum of industry business models. As currently drafted, the proposed legislation seeks to make the fiduciary standard designed for Registered Investment Advisors, now under oversight of the SEC, also applicable to all financial advisors in the broker/dealer industry, without regard to important differences between these business models. Ultimately the proposal falls short of real protection for middle class retail investors for the following key reasons:
? The core issue the proposal attempts to resolve – bringing clarity to investors over the difference between investment advisors and broker-dealers – will not be addressed through the adoption of an arcane and opaque fiduciary duty as the standard of care for those dispensing investment advice;
? The term ‘fiduciary standard’ is subject to a variety of different legal definitions that fail to provide investors clarity as to the specific duties owed to them by their financial advisor;
? Imposing the so-called ‘fiduciary standard’ will have the unintended consequence of limiting middle class investor access to financial advice, products, and services by increasing costs and raising other barriers to entry;
