SEC Investor Committee Issues Fiduciary Plan

Hoping to push the Securities and Exchange Commission’s fiduciary rulemaking along, a subcommittee of the agency’s Investor Advisory Committee has drafted a proposal that would put brokers under fiduciary standards that advisors adhere to.

Under the draft proposal, the subcommittee says that a fiduciary duty for investment advice should include, “first and foremost, an enforceable, principles-based obligation to act in the best interest of the customer.”

In approaching this issue, the subcommittee says that the SEC’s goal “should be to eliminate the regulatory gap that allows broker-dealers to offer investment advice without being subject to the same fiduciary duty as other investment advisors but not to eliminate the ability of broker-dealers to offer transaction-specific advice compensated through transaction-based payments.”

The subcommittee adds that “Though it may require both regulatory flexibility to permit the existence of conflicts of interest and some regulatory changes to reduce the most severe conflicts of interest in the broker-dealer business model, the Committee believes that advisory services offered as part of a transaction-based securities business can and should be conducted in a way that is consistent with a fiduciary standard of conduct.”

Barbara Roper, director of consumer protection for the Consumer Federation of America, who chairs the SEC’s Investor as Purchaser Subcommittee that issued the proposal, told ThinkAdvisor that the subcommittee’s hope is that “by weighing in early in the [fiduciary rulemaking] process, we can help to shape the form that commission rulemaking takes.”