Draft Of A Standard For Professional Conduct For All Advisors; Ron Rhoades Invites Comment On Proposed Rules To Ensure Consumers Can Trust Their Financial Advisors

Monday, June 10, 2013 10:42
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Draft Of A Standard For Professional Conduct For All Advisors; Ron Rhoades Invites Comment On Proposed Rules To Ensure Consumers Can Trust Their Financial Advisors

Tags: fiduciary standard

Three weeks ago, I reported that Ron Rhoades, an expert in the legal underpinnings of the fiduciary standard in the Investment Advisers Act of 1940, had written an entry to his blog that “read like a preamble to a single fiduciary standard for financial advisors.”

 
This past weekend, Rhoades published a draft of a fiduciary standard of professional conduct for investment advisers.

This Website Is For Financial Professionals Only


 
Rhoades is trying to move forward the debate on applying a single fiduciary standard to all U.S. financial advisors, an issue widely expected to be settled in the next 12 months by Congress and the Securities and Exchange Commission.  Rhoades is publicly asking tough questions involved in establishing rules ensuring U.S. consumers can trust financial advisors.
 
Under current law, registered reps affiliated with broker-dealers have one set of rules for fulfilling their role as fiduciaries (under the Securities Exchange Act of 1934), while employees of an RIA have a different standard (under the Investment Advisers Act of 1940).  
 
Rhoades, in this weekend’s post, focuses on conflicts of interests, to explain why it’s important to create a single fiduciary standard.
 
“The lobbyists of Wall Street firms and insurance companies, and the hired law firms of large BD firms and insurance companies, are now extensively arguing that, should fiduciary duties be applied to brokers, only "disclosure" of a conflict of interest is required,” says Rhoades. “To that I would say ... nonsense. Under the application of Wall Street's wish list for a "new federal fiduciary standard," a bona fide fiduciary standard would not be applied. The fiduciary duty of loyalty is not met simply by disclosure of a conflict of interest; much more is required.”
 
Rhoades’ draft definition of a fiduciary standard of conduct for investment advisers is an ambitious project. He’s inviting comment on his draft and it’s a meritorious effort, and all sides in the debate could benefit from the discussion.
 

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