Insurance agent trade groups are forecasting a doomsday scenario for broker-dealers and their agents under a uniform fiduciary standard as suggested by a recent Securities and Exchange Commission staff study.
But a personal liability underwriter and an insurance company with a broker-dealer say such doom-and-gloom forecasts are, at best, premature.
In a statement after the SEC staff study was released, officials of the National Association of Insurance and Financial Advisors and the Association for Advanced Life Underwriting said the staff study does not appropriately recognize that such uniformity could harm middle and lower-market investors.
But, Ross Herlands, an underwriter with Aspen Specialty Insurance in New York, said that "a fiduciary standard could look a lot of different ways."
"It could result in guidelines that could demand greater disclosure, or it could be much more intrusive," Mr. Herlands said.
"So any comment is speculative, given that the agency could go in several different directions," Mr. Herlands say.
A spokesman for Mass Mutual Insurance Company, Springfield, Mass., said it supports a uniform fiduciary standard of care for broker dealers and investment advisers.
"In its recent study, we feel the SEC has articulated a prudent approach for providing investment investment advice for customers, and agree that a uniform standard should be neutral to any business model," the spokesman said.
"The recommendations in the SEC study were developed with a view toward minimizing costs and ensuring that investors continue to have access to products that help provide financial security, both of which directly benefit consumers," the Mass Mutual spokesman said.
"While we continue to watch these developments, we do not expect these recommendations to have a significant impact on MassMutual," the spokesman said.
In his statement, Terry Headley, president of NAIFA, said that, "NAIFA is concerned that the potential additional costs and increased potential for liability of applying a 'one size fits all' fiduciary standard of care to the broker-dealer business model could result in middle- and lower-market investors having less access to the account services and investment advice that are currently being delivered by registered representatives of broker-dealers."
AALU President Nat Perlmutter added added that, "We believe investors could be hurt, rather than helped, by such an action, reducing access to, and increasing the cost of, important financial products and services."
Herlands, the professional liability underwriter, cautioned, however that, "this is only a staff study," and the SEC must first draft a rule and submit to it to industry comment.
"Therefore, the industry will have input, and a chance to craft the rule to something it could live with," he said.
In general, he said that, "We will not see a change for perhaps several years.
"There will be industry battles to shape the final regulation and there will be a transition period," he said. "So, looking into the future is difficult."
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