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November 25, 2014 at 09:03 AM
Fiduciary advocates told Securities and Exchange Commission Chairwoman Mary Jo White in a recent letter that the upcoming release of the agency’s economic analysis of a fiduciary rulemaking must be “thorough and well-reasoned” and meet six criteria, as a “faulty analysis could doom or further delay” prospects for fiduciary reform.
In their Nov. 21 letter, the Financial Planning Coalition — the Financial Planning Association, the National Association of Personal Financial Advisors, the Certified Financial Planner Board of Standards — as well as the Consumer Federation of America and Fund Democracy Inc., provided to White, the SEC commissioners, as well as to Mark Flannery, the head of the agency’s Division of Risk Analysis, what they view as “key elements” that must accompany the expected release early next year of the economic analysis.
The pro-fiduciary groups laid out the following six areas where they say the Commission “has gone astray in the past,” which has resulted in the agency being “either unwilling or unable over the past 25 years to develop a rational policy framework for the delivery of personalized investment advice to retail investors.”
The analysis must include the following elements, the groups said in their letter, if it is to provide “an appropriate foundation for sound regulatory policy.”
The analysis must:
–Accurately depict the differences between the suitability standard that applies to sales recommendations and the fiduciary duty that applies to investment advice;
–Correctly identify the investor harm that regulation is intended to rectify;
–Clearly describe the regulatory conditions that permit that harm to occur;
–Comprehensively describe the form that harm takes and the means by which the harm occurs (although the Commission cannot reasonably be expected to quantify the total costs to investors of that harm);
