To read the March 1, 2013 release of the SEC’s fiduciary questionnaire evokes the worst nightmare a university student could have. As industry thought leaders have opined, (see “Has SEC Unfairly Rigged Its Fiduciary Questionnaire?FiduciaryNews.com, April 23, 2013), one must wonder if the whole thing is a sham – an elaborate political scam designed to shove aside the agency’s mandate to protect investors in favor of Wall Street’s vast oceans of potential political donations. 

The problem centers on the nature and apparent bias of the document – titled “Duties of Brokers, Dealers, and Investment Advisers” – itself. First, coming in at 72 pages, its heft alone is enough to intimidate even the most experienced fiduciary advocate. Second, it comes across like one of those college tests you have nightmares about (you know, the ones where you’re dreaming you oversleep before the final, rush to the exam in your pajamas only to find the questions are written in some obscure Sanskrit dialect. Oh, yeah – and it’s a math test). 

See also: An advisor’s code of ethics

Here’s an example of what the SEC is asking for (from Part III E. 1.b. on page 44-45):

Provide data and other information describing the likely benefits and costs for firms and retail customers from firms engaging in these activities under the uniform fiduciary standard of conduct and each of the alternative approaches discussed above. In particular, describe the cost to broker-dealers and investment advisers in terms of dollars and time spent from providing these activities to retail customers under the uniform fiduciary standard and each of the alternative approaches. Also provide data and other information describing the benefits and costs to firms and retail customers likely to result from voluntary actions firms may take that are not necessarily mandated by the relevant standard. If possible, separate costs by service type, and differentiate by retail customer demographic and account information.

Heck, it’s a wonder the SEC didn’t also pass out blue books when they issued this release.

But here’s the vilest part. The SEC questionnaire is incredibly biased. If industry lobbyists fighting the fiduciary standard had written this SEC release, it wouldn’t have looked much different. In fact, so slanted is the questionnaire, one is left with one’s own questions, such as:

  1. Why has the SEC placed the business models of the industry ahead of protecting the investor?
  2. Why does the SEC insist on focusing on the never validated “cost” to the industry while ignoring peer-reviewed academic research that indicates the cost to investors of no fiduciary standard exceeds the GDP of some small developing nations? (see “Study: SEC Fiduciary Delay Costing Retirement Investors $1 Billion per Month,” FiduciaryNews.com, Feb. 12, 2013)
  3. Why does the SEC even assume cost matters when the real issue is the damages caused by industry conflicts of interest? (see “Yet Another Independent Study Highlights High Conflict-of-Interest Cost to Retirement Investors,” FiduciaryNews.com, Feb. 26, 2013)
  4. Why, despite peer-reviewed academic research proving evidence to the contrary, does the SEC continue to entertain the assumption that disclosure has any significance? (see “Exclusive Interview with Yale’s Daylian Cain: Just a Sugar Pill? Disclosure’s ‘Ah-Ha!’ Moment,” FiduciaryNews.com, Oct. 18, 2010) 

Like a trail of breadcrumbs, nearly every point raised by the SEC has been answered by objective, nonpartisan researchers. Yet the SEC has actively chosen to ignore this helpful research and, instead, has opted to ask a labyrinth of stale queries posing as an honest attempt at enlightenment.

This, of course, leads us to our last series of questions: Where are the consumer advocates in this melee? Why have we not heard the plaintive cries of Main Street as Wall Street sucks dry its long-term livelihood? Finally, where is the mainstream media, the self-proclaimed “watchdog” of the citizenry, the much ballyhooed fourth estate, to be found as the Goliaths of industry stomp on the average men and women that make our country so great? The adoption of the fiduciary standard would not even be in question if the powers of our leading newspapers and broadcasters came together to expose the pillaging allowed by our supposed regulators.

One day in the future, when America returns to the land of integrity it once was, someone will write the definition of “Fiduciary Duty” in a dictionary somewhere. In it, they’ll define it as a duty of loyalty to those one is bound to protect. At the end there will be the usual list of antonyms, including this one: “The SEC’s Handling of the Adoption of a Uniform Fiduciary Standard.”

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