Hoping to break the stalemate in the Securities and Exchange Commission’s efforts to write a rule to put brokers under a fiduciary mandate, seven leading consumer and industry organizations supporting a uniform fiduciary duty provided the SEC on Thursday with a “roadmap” for resolving the debate about how to create that rule.
To move the current “deadlocked” process forward, the groups say the “compromise framework” uses a July 2011 letter from the Securities Industry and Financial Markets Association (SIFMA) as a starting point to the SEC finding “common ground” with many of the groups’ positions and suggesting a path forward where there is disagreement.
The organizations represented in the letter are the Consumer Federation of America, Fund Democracy, AARP, Certified Financial Planner Board of Standards, Inc., Financial Planning Association, Investment Adviser Association, and the National Association of Personal Financial Advisors.
In the 16-page letter to SEC Chairwoman Mary Schapiro, the groups say that they all “strongly support extension of the Investment Advisers Act of 1940 fiduciary duty to all broker-dealers when they offer personalized investment advice about securities to retail customers.”
The SEC, the groups say, should define “personalized investment advice” to which the fiduciary duty would apply and “supplement that definition with guidance regarding the types of business activities that would, and would not, constitute such advice.”
Moreover, the groups also say they support the general approach to accomplishing this goal outlined in the Section 913 Study issued by the commission staff in January 2011: the adoption of parallel rules imposing a uniform fiduciary duty on broker-dealers and investment advisors consistent with Congress’s grant of authority under Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. “Properly implemented,” the letter said, “this approach would provide badly needed and long overdue protections for individuals who receive investment advice from broker-dealers without imposing undue regulatory burdens on brokers and without disrupting transaction-based aspects of the broker-dealer business model.”