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November 11, 2010 at 04:49 AM
The Dodd-Frank Act brought closure to numerous regulatory issues, but it failed to resolve the issue of whether broker-dealers should be subject to a fiduciary duty when providing retail investment advice.
Instead, the Act gave the Securities and Exchange Commission an unprecedented rulemaking opportunity to close a gap in regulation and protect Mom and Pop investors from abuses fostered by current standards.
Removed from the glare of the contentious legislative debate over Dodd-Frank, teams from the SEC have been busy this fall preparing a number of congressionally mandated studies as a prelude to rulemaking.
Among the first studies launched by the SEC is an examination of the obligations of brokers, dealers and investment advisers, including an exploration of the regulatory resources and effectiveness of those overseeing broker-dealers and investment advisers who provide services to investors.
As part of the study process, SEC commissioners and staff have been meeting with a diverse group of stakeholders, recently including a delegation from NASAA. I’d like to take this opportunity to share our views.
My NASAA colleagues and I strongly urged the Commission to avoid efforts to adopt or otherwise promulgate a standard that is any less stringent than the Investment Advisers Act fiduciary standard. Financial professionals who provide investment advice ought to be held to the Advisers Act’s well-established fiduciary duty standard.
When receiving investment advice, investors deserve and should be afforded the same level of protection and care no matter which type of financial professional they engage.
The lines between services provided by broker-dealers and investment advisers have blurred over the years, due in large part to brokers marketing themselves as “trusted advisors.” Yet substantial differences remain. As a result, any regulation promulgated by the Commission should take these differences into consideration.
