There are and two areas that stand out. The first is compensation. The loudly-announced decision by Goldman Sachs to limit 2009 bonuses of 30 management-committee members to stock, and to allow for a non-binding shareholder vote on compensation, made a mark. House Republicans also proposed compensation limits. According to House Financial Services Committee Democrats, Republicans should be given, “credit here for agreeing with Democrats.”
A second area where “sensible regulation” should be viewed similarly by both sides regards applying the authentic fiduciary standard to all professionals who give personalized investment or financial advice. While most Democrats appear to support reasonably applying the fiduciary standard, Republicans express tepid concerns. This skepticism, for a number of reasons, can be overcome, though. First and foremost, the three major expressed objections to the fiduciary provision, that it’s “one-size-fits-all,” may increase costs or reduce investor choice, have been shown to be either overstated or inaccurate. Experience suggests that as an accurate understanding of applying the standard increases, concerns about it decrease.
The future of financial reform in the Senate is uncertain, as long as partisanship rules. Senator Christopher Dodd, (D-Connecticut), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, has taken important steps to address this hurdle, but he cannot do it alone. He needs help. While supposedly the body where passions “cool,” it’s not clear how much cooling there is in the Senate today. And this concern was not helped much when, last week, the Senate Majority Leader publicly compared opponents to the Healthcare Bill to those who “dug in their heals,” over slavery. If ever there was a time for outside groups to play a positive role in promoting change, it is now.
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.
Read more of Knut Rostad’s Regulatory Reason blog posts:
Peter Drucker for Wall Street Czar November 24, 2009 Drucker would advise Wall Street to ask what retail brokers think. About being a fiduciary, brokers might “surprise” execs. Many would say “Bring it on!”… Too Rich or Too Thin? November 03, 2009 You can never be too rich or too thin: Can we disclose ourselves out of obesity? Can disclosures replace fiduciary duty?…
A Tail is Not a Leg October 16, 2009 As the rhetoric heats up over regulatory reform one is reminded how much political life has not changed all that much since Abraham Lincoln was quoted noting the following: “How many legs does a dog have if you call the tail a leg? Four…” …
SEC Chairman Speaking the Fiduciary Language September 28, 2009 SEC Chairman Mary L. Schapiro’s September 24th speech, before the Financial Services Roundtable, included her most recent public remarks on the fiduciary standard. The Chairman’s remarks are important. …
Rakoff’s Bank of America Opinion: “The Tipping Point” September 16, 2009 In September 2013 when we look back on Lehman Bothers’ demise, will we also see a “reformed” financial system and regulatory structure? One that may be hard to recognize compared to today’s structure? If “yes,” look to Judge Jed S. Rakoff’s opinion. …
Listen to Chuck August 31, 2009 When Chuck Schwab talks do people listen? They ought to–even when he is off base, as he was in an August 19 opinion piece, “Brokers Aren’t Responsible for Bad Bets,” in The Wall Street Journal….
Disclosures and Evoking the Lewis Liman Defense August 14, 2009 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? August 11, 2009 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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December 14, 2009 at 07:00 PM
The current political environment recalls a Bloomberg report last June, “Wall Street Sets Campaign on ‘Populist Overreaction,’” on the securities industry’s Washington lobby campaign. The campaign, according to Bloomberg, was designed to “counter the ‘populist’ backlash against bankers,” and reveals how Wall Street is “grappling with its pariah status.” The article cites an internal industry document as saying: “It is imperative in the historic period of reform, the industry be recognized as playing a positive role in seeking change…”
