WASHINGTON–Six financial services trade groups are urging the Securities and Exchange Commission (SEC) to study the fiduciary standard issue in “a comprehensive manner” and work with all sides to develop “an effective, efficient and lasting framework” for investor protection.
A joint letter from the group also asks the SEC to conduct the study with an eye on protecting retail investors while giving retail customers a full spectrum of choice in buying securities products and services.
The joint letter was submitted Monday by the American Council of Life Insurers, the Association for Advanced Life Underwriting, the Financial Services Institute, the Insured Retirement Institute, the National Association of Insurance and Financial Advisors (NAIFA) and the Securities Industry and Financial Markets Association.
Monday was the deadline for comments on section 913 of H.R. 4137, the Dodd-Frank Wall Street Reform and Consumer Protection Act.
More than 2,000 comment letters are expected to be submitted to the agency on the issue. As of Aug. 24, the SEC had received more than 1,700.
The provision mandates that the agency complete a study on the fiduciary standard issue within six months of passage of the legislation.The provision in the law dealing with the issue gives the agency the power to draft a new standard-of-care rule based on the findings of the report.
A priority for the industry is to ensure any final standard recognizes that insurance agents sell a limited range of investment products and that many work for a broker-dealer that is part of an insurance company. The industry also wants to ensure that any final rule provides that once an investment advisor acting with “best intent” completes the sale of an investment product, the duty ends and does not continue on “ad infinitum,” as a NAIFA official stated.
The letter asks that any final rule “recognize the benefits that retail customers derive from the choices presented by a diversity of business models providing personalized investment advice about securities to retail customers.”
The purpose of this joint comment, the groups said in their letter, “is to emphasize our shared belief that the study presents a unique opportunity for the SEC, as directed by Congress, to focus on complex and important issues with respect to the provision of personalized investment advice about securities to retail customers by brokers, dealers and investment advisers.”
Each of these groups are also submitting their own letters.
In the joint letter, the groups asked the SEC to use the study as an opportunity to analyze existing regulatory systems rigorously, identify those that are working well and those that are not, and weigh the likely effects to the retail and other investing public and the industry of any potential changes.
“This is in keeping with the goal of better protecting retail customers and other investors without unnecessarily increasing costs and/or reducing investor choice and access to important personalized investment advice about securities,” the letter said.
The letter also asked that the SEC recognize “the benefits that retail customers derive from the choices presented by a diversity of business models providing personalized investment advice about securities to retail customers.”