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July 13, 2011 at 10:09 AM
July 21 not only marks the one year anniversary of the passage of the Dodd-Frank Act, but it’s also the date when the Securities and Exchange Commission (SEC) will turn its attention to crafting a fiduciary duty rule for brokers.
What’s the chance the SEC will not issue a fiduciary duty rule? There’s about a “one in one hundred chance [the SEC] does nothing,” said John Taft, CEO of RBC Wealth Management, during comments at the Securities Industry Financial Markets Association’s (SIFMA) Dodd-Frank Impact Analysis conference on Wednesday.
Taft, who also serves as chairman of SIFMA, was part of a panel discussion exploring Dodd-Frank’s impact on the individual investor, which primarily focused on the fiduciary duty rule for brokers that was mandated under Section 913 of Dodd-Frank and which SEC Chairman Mary Schapiro (left) has said the agency will begin writing after July 21.
The panelists–which included Taft; Charles Johnston, Vice Chairman of Morgan Stanley Smith Barney; Kathleen Murphy president of Personal Investing at Fidelity Investments; and Ben Plotkin, executive VP of Stifel Financial—made educated guesses as to what the final fiduciary duty rule will look like.
Taft said it’s important to note that the ’40 Act fiduciary standard that advisors must adhere to applies specifically to “discretionary investment advice.” If the SEC, he said, decides to “write a rule that imposes a fiduciary rule that [applies] to all personalized investment advice,” the agency will have to consider how to apply that fiduciary rule to activities that go beyond discretionary investment management—and into brokers’ suitability realm.
“A new [fiduciary] standard is what’s needed,” Taft said. “Rules that don’t exist today need to be written to understand how to apply that fiduciary standard to brokerage activities—which are many, varied and almost impossible to describe.”
