WASHINGTON BUREAU — Sen. Robert Menendez has been on the Senate floor trying to round up support for the idea of imposing a fiduciary standard of care on all sellers of retail investment products.
Insurance policy experts are expecting Menendez, D-N.J., to offer a fiduciary standard amendment that would modify S. 3217, the Restoring Financial Stability Act, sometime this evening. The amendment, cosponsored by Sen. Daniel Akaka, D-Hawaii, would put the original version of Section 913 back in of S. 3217.
Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee, included the Section 913 fiduciary standard provision in a draft of the financial services bill unveiled in November 2009.
When the committee approved the bill in March, it replaced Section 913 with a provision that calls for the U.S. Securities and Exchange Commission to study the obligations of brokers, dealers and investment advisors to retail customers, then report back to Congress within 18 months.
The Menendez-Akaka amendment would give the SEC the authority to impose new rules dealing with the issue based on its findings.
The language now in the bill would let the SEC impose new rules only if the rules addressed “regulatory gaps and overlaps in existing rules.”
A fiduciary standard requires a seller to place the interests of the customer first.
Current rules apply a fiduciary standard to investment advisors and apply a suitability standard to broker-dealers.
A suitability standard requires only that a seller of securities verify that the products sold to an individual suit the needs of that individual.
Many insurance producer groups have argued that the fiduciary standard provision now in S. 3217 would be difficult or impossible for life insurance agents who sell securities to meet, because many agents have contracts that permit them to sell products written only by one company, or by a small group of companies.
Menendez talked on the Senate floor Wednesday about the recent civil fraud suit that the SEC brought against Goldman Sachs Group Inc., New York.