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May 01, 2011 at 08:00 PM
Rep. Scott Garrett, R-N.J., and other Republican members of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises wrote in a March 17 letter to the Securities and Exchange Commission that the agency should refrain from issuing a fiduciary duty rule as “the Commission has not identified and defined clear problems that would justify a rulemaking and does not have a solid basis upon which to move forward.”
Committee members wrote that Section 913 of the Dodd-Frank Act gives the agency discretion to adopt a rule, but doesn’t require it, and the SEC should conduct a “thorough cost-benefit analysis” before moving forward.
Legitimate questions raised by Republicans should be answered. The problem is that the incestuous relationship the SEC has with the industry does not allow a frank discussion of what regulatory reform means to the consumer for fear of criticizing the industry’s current state. The road to better opportunities for the SEC staff goes to the industry—thus a vested interest not to burn any bridges. This is why the industry is still in denial on regulatory reform, and why slam-dunk arguments are not being made for regulatory reform. There are significant structural conflicts that are beyond the control of the broker/advisors which preclude them from acting in the consumer’s best interest:
1. It is still a violation of internal compliance protocol for brokers to acknowledge they render advice and have a fiduciary duty to act in the consumer’s best interest.
