As the Securities and Exchange Commission (SEC) heads into finalizing its study on advisor and broker obligations–the SEC must submit its final report to Congress by February–academics, lawyers and industry executives gathered at the Fiduciary Forum in Washington on Friday to explore the fiduciary standard in a brokerage setting.
The Forum, presented by the Committee for the Fiduciary Standard, the CFP Board, the Financial Services Institute (FSI), the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA), was designed to bring together “a range of views” on the fiduciary standard discussion, said Knut Rostad, chairman of the Committee for the Fiduciary Standard, in an interview.
“We hope the discussions today will provide useful insight” to the SEC as it finalizes its study and moves into the rulemaking process. Rostad said one of the main arguments that brokers have made is that “disclosure” can be a “substitute” to brokers adhering to a fiduciary duty. Brokers have put a “huge emphasis” on disclosure as adequate investor protection. “I think that’s off-base.”
Indeed, Robert Prentice, chair of the Business, Government & Society Department of the McCombs School of Business, University of Texas at Austin, said during his presentation that many studies have shown that mandated disclosure is ineffective to propel securities professionals to act in the best interest of their clients.
“Unfortunately, for a variety of reasons, lawmakers and regulators seem to default to disclosure as the key remedy for even the most dramatic ills of the financial and securities systems,” Prentice said.