Senator Tim Johnson (D-South Dakota) offered House conferees a compromise Tuesday night, June 22, regarding putting brokers under a fiduciary standard of care by retaining the Senate’s call for an SEC study of advisor and broker obligations to retail investors but added giving the SEC the authority to write a universal fiduciary standard at the end of that study. The Senate compromise is still being negotiated, however, and while the House has yet to fully accept it, House Financial Services Chairman Barney Frank said in the early Thursday morning debate that the “House acquiesces to the Senate study” with some modifications. The last day of the conference is Thursday, June 24.
Barbara Roper, director of consumer protection for the Consumer Federation of America (CFA), who’s just one proponent of the House’s original language calling for a fiduciary mandate for brokers, argues that Johnson’s compromise “gives the allusion that the SEC would be authorized to act” on instituting a fiduciary standard for brokers. Johnson’s compromise, she says, “puts such impossible barriers in [the SEC's] way that if they [the SEC] tried to adopt [fiduciary] rules they’d be tied up in court and probably lose.”
Johnson’s compromise, Roper continues, does not apply the House’s language calling for a fiduciary duty for brokers, but instead uses “in the client’s best interest.” So it directs the SEC “toward adopting a lower standard for brokers than applies to advisors, perpetuating the problem we’re trying to solve.”