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August 09, 2010 at 08:00 PM
The Securities and Exchange Commission is making clear that it will move promptly to extend the fiduciary standard to all professionals who sell investment products–a critical issue for insurance agents who sell a limited range of products and the broker-dealers they work for.
The provision is Sec. 913 of H.R. 4137, the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The provision mandates that the agency complete within six months of passage of the legislation a study on the fiduciary standard issue.
The provision in the law dealing with the issue then gives the agency the clear power to draft a new standard-of-care rule based on the findings of the report.
At the same time, in public comments, agency chairman Mary Schapiro made clear she will not allow the notice-and-comment process to be used to water down the intent of the financial services reform law.
The SEC would follow the new law “to the letter” when writing its rules, she said at a forum sponsored by the Chamber of Commerce. “The regulatory process is not designed to re-debate issues that Congress has resolved,” she said. 
And, she again voiced support for a uniform fiduciary standard “no less stringent” than the standard applicable to investment advisers, and said an investment adviser must “put the interest of their clients before their own.”
An insurance industry lawyer who asked that his name not to be used cautioned that Ms. Schapiro’s comments and actions aimed at a transparent rulemaking process are not as important as the substance.
“At the end of the day, what agents and brokers should be looking for are commissioner and staff signals on what the fiduciary standard regulation will look like,” the lawyer said.
“How it deals with compensation for agents and brokers, disclosure rules, marketing restrictions, conflict of interest and trading policies are key, not the process,” the lawyer said. “Those mandates are what agents and brokers are going to have to live with down the road.”
