A uniform fiduciary standard for all providers of advice is back on the table in the Senate.
Supporters, including financial planners, said Friday, April 30, that they are hopeful that the recent hearing on Goldman Sachs’s trading activities will put pressure on Congress to tighten the rules governing sale of investment products by restoring language removed from the Senate bill in March.
The bill is S. 3217, the “Wall Street Transparency and Accountability Act of 2010.”
Debate on amendments to the measure will begin Monday, May 3.
The amendment to the bill was proposed Thursday, April 29, by Sens. Robert Menendez, (D-New Jersey), and Daniel Akaka (D-Hawaii).
It would restore language formerly in the bill establishing a “fiduciary duty for brokers, dealers, and investment advisers.” The Securities and Exchange Commission (SEC) and its chairman, Mary Schapiro, is pressuring Congress to tighten the provision,
The two Senators are calling their addition to the financial services reform bill shepherded by Senator Chris Dodd (D-Connecticut) the “Honest Broker Amendment.”
The fiduciary standard would require all advice-givers to individuals–including brokers and insurance agents–to put the needs of their clients first when they sell financial products.
SEC Commissioner Presses Fiduciary Standard
In a speech to the Investment Adviser Association Annual Conference in Chicago Thursday, SEC Commissioner Luis Aguilar voiced support for the tougher language.
“This is the ultimate investor protection issue because the harm to investors is real if broker/dealers giving advice are not held to the fiduciary standard,” Aguilar said, “and fail to put their client’s interests before their own.”
Knut Rostad, a financial planner who is a key official of the Committee for the Fiduciary Standard, a coalition of trade groups and individuals from the investment, advisory, and press who support the uniform standard, said the recent hearing on trading by Goldman Sachs of mortgage-backed-securities it created then sold options betting that they would lose value, put pressure on Congress to impose tougher standards.
“The Goldman hearing disrobed the suitability / fair dealing standard,” Rostad said. “The world saw [through the recent Senate hearing] what this lower standard actually requires,” he added.