(This story originally appeared on WealthManagerWeb.com)
Whatever happened to the repeal of the broker/dealer exemption allowing brokers to give advice to customers–but not require a fiduciary duty to those clients? The Financial Planning Association (FPA) sued the Securities and Exchange Commission (SEC) over this rule–and won a court ruling requiring the rule to be overturned–in 2007. But that has not happened. Why?
Wealth Manager talked about this with fiduciary expert Ron Rhoades, in mid-March and again in May. Rhoades is an attorney, and director of research, chief compliance officer and private wealth manager for Joseph Capital Management, LLC. The exemption allows broker/dealers to provide advice as long as the advice is, according to the SEC, “solely incidental to the conduct of his business as a broker or dealer and who receives no special compensation therefor.”
There’s a great deal of debate going on about whether broker/dealers should put their clients’ interests ahead of their own if they provide advice. If they have discretion over client assets, of course, they must be fiduciaries, but what about when they provide similar advisory services to investment advisors?