Podcast Center
Video Center
Webcasts
Resource Center
Events
March 26, 2010 at 08:00 PM
Luis Aguilar today defended the idea of applying a fiduciary standard of care to all advisors who give retail clients personalized investment advice.
Aguilar, a U.S. Securities and Exchange Commission commissioner, spoke in Washington at a conference for investment advisors.
The SEC wants all advisors who give investment advice to consumers to meet a fiduciary standard of care, which would require them to put the consumers’ interests with undivided loyalty.
Today, the government requires investment advisors to meet a fiduciary standard, but it requires broker-dealers, and life insurance agents affiliated with broker-dealers, to verify only that the products sold to consumers suit the needs of those consumers.
Broker-dealers and life agents have argued that the suitability standard fits their role, because they openly sell financial products for just one company, or a limited number of companies, and cannot necessarily sell consumers what appear to be the very best products of those products are not on the list of products that they are allowed to sell.
The Senate Banking, Housing and Urban Affairs has been working on a bill, the Restoring American Financial Stability Act of 2009 bill, that originally was going to appy a fiduciary standard to all providers of retail personalized investment advice.
The version of the bill approved by the committee earlier this week requires only that the SEC study the issue and report to Congress on its findings.
“It is incumbent on all of us — the SEC as the industry’s regulator and you as the compliance experts — to make sure that investors are protected,” Aguilar said today at the investment advisor conference, according to a copy of his remarks provided by the SEC.
“Recent events have deeply shaken investor confidence, and we all need to work hard to return to the bedrock principle that the capital markets should be known for their integrity and their fairness,” Aguilar said.
The fiduciary standard requires that “aAn adviser that has a material conflict of interest must either refrain from acting upon that conflict, or it must fully disclose all material facts relating to that conflict, and obtain the informed consent of its clients, before acting,” Aguilar said. “In addition, an investment adviser has the duty to seek best execution, to make suitable recommendations, and to have a reasonable basis for the investment advice that is provided to clients.”
