Fearing the Securities and Exchange Commission is headed toward proposing a watered-down fiduciary rule, a broad coalition of organizations urged SEC Chairwoman May Jo White in a Tuesday letter to “establish a uniform fiduciary standard for broker-dealers and investment advisors that is at least as strong as the existing standard.”
The groups—which included the Investment Adviser Association, the Financial Planning Coalition, Fund Democracy, Consumer Federation of America, AARP, NASAA and AICPA—told White that the SEC’s March request for information (RFI) signals to them that the SEC “may be backing away from requiring a fiduciary standard for broker-dealers that is ‘no less stringent’” than the one under which RIAs currently operate.
“The assumptions contained in the RFI fail to include key elements of the fiduciary standard such as the obligation to act in the best interest of the customer,” the groups told White. “If the fiduciary duty is based on the RFI assumptions, it would be weaker than that originally set forth in the Section 913 Study and far less stringent than that currently imposed under the Advisers Act.”
If the SEC were to adopt this approach, the groups said they “fear that it would significantly weaken the fiduciary standard for SEC-registered investment advisers, while adding few new protections for investors who rely on broker-dealers for investment advice. This approach would have negative consequences for investors and is one we would vigorously oppose.”
Barbara Roper (right), director of Investor Protection for CFA, stated that “broker-dealers call their sales representatives financial advisers, they market themselves based on the advice they offer, and they encourage investors to rely on them as trusted advisers. It is hardly surprising then that most investors make no distinction between brokers and advisers and that disclosure is ineffective in eliminating that investor confusion.”