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April 03, 2015 at 07:55 AM
The Institute for the Fiduciary Standard said Thursday it has doubts about the SEC’s ability to formulate a fiduciary standard that will protect the interest of Americans trying to save for retirement.
Those doubts, according to Knut Rostad, president of the nonprofit Institute for the Fiduciary Standard, are based on a close examination of public comments made by various SEC officials and agency rulings.
The “culture” at the SEC, Rostad claimed, regards conflicts of interest as unavoidable and views the difference between the tougher fiduciary standard and the “suitability” standard to which the securities industry is held as minimal.
There is “little ambiguity” about this point in the statements and actions of SEC officials, said Rostad, who argues the agency has taken a “new and benign view of conflicts” which holds they are “routine and acceptable — not inherently inconsistent with providing objective advice.”
“There is no consideration (at the SEC) for what is in the client’s ‘best interest,’ Rostad wrote in a paper released Thursday, “Conflicts of Interest and the Duty of Loyalty at the SEC.”
The SEC declined to comment on the institute’s claims.
Also read: SEC chief will push for tougher fiduciary rule
At a conference last month hosted by the Securities Industry and Financial Markets Association, agency Chair Mary Jo White said the SEC should “implement a uniform fiduciary duty for broker-dealers and investment advisers where the standard is to act in the best interest of the investor.”
White’s announcement was embraced by SIFMA, which has lobbied aggressively against the Labor Department’s efforts to introduce its own version of the standard. “The SEC is the right agency to look at this topic,” said Ira Hammerman, SIFMA’s general counsel. “We have long advocated for the Department of Labor to stand down.”
Barbara Roper, director of Investor Protection at the Consumer Federation of America, which backs a universal and strong new fiduciary standard, said the financial industry’s support of the SEC to take the lead “reflects their belief that they can get a weaker rule.”
The Institute for the Fiduciary Standard shares that concern.
In the paper, Rostad recalls the strong support former SEC Chair Mary Shapiro lent to a new fiduciary standard as early as 2009 and quotes SEC guidance issued as recently as 2011: “As a fiduciary, you also must seek to avoid conflicts of interest with your clients, and, at a minimum, make full disclosure of all material conflicts.”
But over the course of the past several years, the brokerage industry lobby has successfully influenced the thinking at the SEC regarding conflicts of interest, Rostad wrote.
Where the agency was once clear in articulating that conflicts must be avoided, now the agency is content in merely having them disclosed, he asserted.
While the SEC once held that conflicts of interest are inconsistent with objective advice, that view has been replaced with one that holds they are “far less important that previously believed,” according to Rostad.
