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July 16, 2010 at 08:00 PM
Emotions were running high at the final breakout session of the day at the SIFMA Regulatory Reform Summit in New York. The panel on Investor Protection and Broker/Dealer Issues convened at 3:00 on Thursday, July 15, just as the Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Moderated by the head of RBC U.S. Wealth Management and CEO of RBC Capital Markets Corp. John Taft–who is also chairman-elect of SIFMA–the panel discussed the implications of the reforms bill’s passage and their take on fiduciary duty. This editor is a member of The Committee for the Fiduciary Standard.
Taft was joined by panelists Robert L.D. Colby, partner at the law firm Davis Polk and Wardwell LLP, Charles Johnston, president of Morgan Stanley Smith Barney and Kevin M. MacMillan, associate general counsel at Bank of America Merrill Lynch. They appeared agitated about the Senate passing the reforms bill.
The bill “Gives SEC the authority to impose a fiduciary duty on brokers who give investment advice–the advice must be in the best interest of their customers,” according to the summary release from the House Financial Services Committee. The SEC must conduct a six-month study of whether brokers who provide advice to investors should have to provide that advice under a fiduciary standard of care as embodied in the Investment Advisers Act of 1940. For more on the bill, please see “Financial Reform Bill and the Fiduciary Standard for Brokers.”
But it appeared that the panel felt that the definition of fiduciary duty was up in the air–when one audience member asked for a definition of fiduciary duty, and Colby replied, “a fiduciary owes a duty to a customer.” There was laughter and panelists noted that anyone could say that. Colby acknowledged that fiduciary duty under the Investment Advisers Act of 1940 was more “defined.”
After more inconclusive discussion on how to define fiduciary duty, Taft asked what the industry should do, “dilute it, water it down, and dismember the fiduciary standard of care?
